By Joe Ives, Commercial Director, UAE
For years, the Cayman Islands’ segregated portfolio company (SPC) has been a go-to structure for global fund managers due to its flexibility, tax neutrality and strong investor recognition. However, as financial markets evolve, structures available in the UAE’s Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM) have emerged as attractive alternatives. These jurisdictions offer robust regulatory frameworks, strategic positioning and enhanced investor access. While Cayman remains a preferred international financial hub, fund managers targeting Middle Eastern, Asian and emerging market investors may find DIFC and ADGM compelling.
Cayman SPC: a trusted offshore solution
The Cayman SPC structure allows fund managers to operate multiple segregated portfolios (SPs) under a single legal entity, providing statutory asset and liability segregation. This setup is widely used for hedge funds, private equity and structured finance vehicles. The Cayman Islands Monetary Authority (CIMA) oversees the jurisdiction, ensuring compliance with global regulatory standards while maintaining its appeal as a tax-neutral destination.
One of the main advantages of Cayman SPCs is their strong reputation and familiarity among institutional investors, particularly in North America and Europe. Many fund managers choose Cayman due to its mature fund administration ecosystem and established service providers. However, while each segregated portfolio is ring-fenced, it does not have a separate legal personality, which may pose challenges for some investment structures that require distinct corporate entities.
DIFC and ADGM: rising global fund hubs
DIFC and ADGM have rapidly positioned themselves as leading international financial centres, providing fund managers with a stable regulatory environment, strong investor confidence and tax-efficient structuring options. Both jurisdictions align with OECD and FATF compliance standards, making them attractive to institutional investors seeking transparency and regulatory clarity.
A key differentiator between Cayman SPCs and UAE structures is the availability of both the incorporated cell company (ICC) and the protected cell company (PCC) models. ICCs allow each cell to have a distinct legal personality, offering full legal separation between sub-funds. This structure is particularly beneficial for private equity, hedge funds and multi-strategy investment vehicles, where independent governance and risk isolation are essential.
PCCs, on the other hand, function similarly to Cayman SPCs by offering segregated portfolios without a separate legal personality for each cell. This setup is commonly used for insurance-linked funds, risk structuring, and other specialised financial instruments. While PCCs provide asset segregation, fund managers who require distinct legal entities may prefer the ICC structure.
Attractive tax regime and investor access
DIFC and ADGM offer highly competitive tax advantages, including a 0% corporate tax rate, no capital gains tax and no applicable withholding tax. Additionally, funds domiciled in these jurisdictions can leverage on the UAE’s extensive double taxation treaty network, providing fund managers with significant tax planning benefits. This can be a crucial advantage for funds operating across multiple jurisdictions.
Beyond tax efficiency, DIFC and ADGM provide fund managers with direct access to Middle Eastern sovereign wealth funds, family offices and institutional investors. The region has seen a surge in investment activity, with local investors preferring to allocate capital through regulated, locally domiciled investment firms. Establishing a fund in DIFC or ADGM enhances credibility and facilitates capital-raising efforts from a rapidly growing pool of investors in the Gulf Cooperation Council (GCC) region and broader Asia-Africa corridor.
Choosing the right jurisdiction
Fund managers must consider their investor base, regulatory preferences and structuring requirements when selecting a jurisdiction. Both Cayman SPC and UAE ICC/PCC structures play a crucial role in fund structuring, but the choice depends on strategic priorities.
Cayman SPCs remain a strong and trusted option for global funds, particularly for managers with existing investor bases in North America and Europe. However, DIFC and ADGM ICCs provide legal separation, making them ideal for institutional investors, multi-strategy funds and private equity structures.
DIFC and ADGM PCCs serve a similar function to Cayman SPCs but are particularly well-suited for risk-segregated structures such as insurance-linked investments. While Cayman retains its position as a jurisdiction of choice, the UAE’s growing prominence and investor-friendly environment make DIFC and ADGM a compelling alternative for fund managers looking to optimise regulatory compliance, tax efficiency and access to Middle Eastern and Asian investors.
As the UAE continues to establish itself as a leading financial hub, more fund managers are recognising the benefits of structuring in the DIFC or ADGM. With strong regulatory standing and a growing track record (the DIFC has completed two decades now), tax efficiency and growing investor interest, these jurisdictions are becoming increasingly front-of-mind for fund managers seeking to diversify their investor base and strengthen their global positioning.
How IQ-EQ can help
Navigating fund structuring decisions can be complex, and selecting the right jurisdiction is critical for long-term success. IQ-EQ is a trusted partner for fund managers globally, providing expert guidance on establishing and managing funds in Cayman, DIFC and ADGM as well as many other leading fund domiciles worldwide. Our deep expertise in regulatory compliance, fund administration and governance ensures that fund managers can focus on their core investment strategies while we handle the operational complexities.
Whichever jurisdiction and structure you choose, IQ-EQ offers tailored end-to-end solutions to suit. With a global presence and strong local expertise, we help fund managers make informed decisions and seamlessly establish their operations in the world’s leading financial hubs.
For more information on how IQ-EQ can support your fund structuring needs, contact our team today.
