ADGM proposes reforms to attract smaller and institutional private fund managers in 2025

On 24 November 2025 the Financial Services Regulatory Authority of the Abu Dhabi Global Market published a consultation paper that would substantially relax elements of its private funds rulebook for smaller managers and those catering solely to institutional investors, while tightening certain requirements for foreign managers operating ADGM‑domiciled vehicles. The proposals, set out in Consultation Paper No. 12 of 2025, closed for comment on 30 January 2026 and form the first phase of a two‑stage review of the ADGM funds framework, with further reforms expected later in 2026.

Under the principal measures, two new, lighter regimes would be available. One would apply to managers whose total committed capital across funds does not exceed $200 million and who operate only closed‑ended vehicles. The other would apply to managers who accept only large institutional investors , defined in the consultation as investors committing at least $5 million and excluding natural persons. According to the ADGM announcement, both categories are intended to reduce entry burdens and ongoing compliance for managers judged to pose lower systemic risk.

For the smaller managers, the FSRA proposes replacing the current expenditure‑based capital test with a fixed minimum base capital of $50,000 and removing the requirement to hold capital equal to 13 weeks of expenses. The paper also canvasses a potential leverage cap of 100% of net asset value and retains a prohibition on acting as a host manager for third‑party sponsors, together with continued professional indemnity insurance obligations. The FSRA framed these measures as aligning the ADGM with international practice while guarding against oversight gaps.

Managers serving only institutional investors would face a different calibration: a minimum base capital at the higher of $50,000 or capital equal to six weeks of audited expenses, but no cap on fundraising. The FSRA proposes to waive professional indemnity insurance for such institutional managers on the grounds that large institutional investors are better placed to assess risk and replace managers where necessary. The consultation does not, however, expressly require documented liquidity risk policies for institutional managers running open‑ended funds, an omission the paper invites feedback on.

The proposals would also simplify the position of Employee Investment Vehicles. The FSRA seeks to exempt qualifying employee co‑investment structures from minimum subscription and client‑classification rules, provided participation is limited to front office staff and investment decision‑makers. The consultation notes the importance of “skin in the game” incentives but seeks views on eligibility windows, participation by consultants or family members, and remediation periods for inadvertent breaches.

At the same time, the regulator is pressing for a stronger ADGM nexus for non‑ADGM managers that run ADGM funds. The consultation would restrict foreign fund managers from acting as host managers, require ADGM‑domiciled funds managed by such managers to appoint a UAE‑resident director, engage an ADGM‑based fund administrator and retain an ADGM‑licensed corporate service provider, and limit new foreign‑managed ADGM funds to closed‑ended qualified investor funds with higher minimum subscriptions. The FSRA has proposed grandfathering certain existing arrangements but left open whether operational requirements such as appointing ADGM‑based administrators will be phased in for incumbent funds.

The consultation sits alongside other recent FSRA initiatives aimed at broadening ADGM’s product menu and regulatory modernisation. According to ADGM statements, earlier in 2025 the regulator finalised rules permitting private credit funds and implemented amendments to its digital asset regime, including tighter controls on privacy tokens and algorithmic stablecoins. The FSRA also published a business plan for 2025–26 emphasising international alignment, combating financial crime, resilience and sustainable finance, and it has separately sought views on periodic reporting requirements for authorised fund managers.

Industry data cited by ADGM shows rapid expansion in recent years: the authority reported a double‑digit year‑on‑year rise in both assets under management and the number of operational entities during the first half of 2025. The consultation paper is presented as part of a strategy to consolidate that momentum by offering more competitive, tailored licensing pathways while maintaining investor protections and on‑shore capabilities.

The FSRA invited written submissions and stakeholder engagement as it moves to finalise the first phase of reforms. According to the ADGM announcement, further consultation papers will consider additional changes, including to public fund regimes. The proposals thus represent a notable recalibration of ADGM’s approach to funds regulation , loosening obligations for defined lower‑risk groups while strengthening local presence and oversight where cross‑border management could dilute supervisory reach.

Observers said the package could make ADGM more attractive to boutique and institutional managers seeking a regional hub with simplified entry rules, but also warned that clarity will be needed on technical points such as the treatment of co‑investment vehicles, the precise measurement of leverage and transitional arrangements for existing foreign‑managed funds. The FSRA’s ongoing consultations therefore appear likely to shape whether the ADGM becomes an even more prominent domicile for private funds across the Middle East and beyond.