The Riffle
The FSRA has released Consultation Paper No. 12 of 2025 proposing wide-ranging updates to the ADGM Funds Framework, with a strong focus on Exempt Funds, Qualified Investor Funds (QIFs), and their managers.
The aim: greater proportionality, international alignment, reduced friction for fund managers, and enhanced oversight where risks are higher.
Strategic Context
ADGM is conducting a two-part, holistic review of its funds regime.This first paper targets the private-fund ecosystem and seeks to:
Align with global best practices
Reflect supervisory learnings
Support ADGM’s growth as a premier fund management centre
Enhance proportionality through new, lighter-touch regimes
Proposal A — Sub-Threshold Fund Manager (STFM) Framework
A streamlined regime replacing and expanding the existing VCFM structure.
Eligibility
Committed capital across all funds ≤ $200 million
Only closed-ended QIFs or Exempt Funds (incl. equivalent foreign funds)
Must not operate as a host manager
Regulatory Treatment
Base Capital Requirement: USD 50,000
No Expenditure-Based Capital Minimum (EBCM)
No mandatory Finance Officer or internal audit
PII remains mandatory
Streamlined authorisation
Mandatory disclosure that the manager operates as an STFM
Key Notes
FSRA seeks feedback on a 100% leverage cap
Exceeding the threshold triggers conversion to full-scope FM
VCFM is absorbed into the STFM regime, with its cap increasing to $200m
Proposal B — Institutional Fund Manager (IFM) Framework
A new category for managers serving exclusively institutional investors.
Eligibility
Manages only QIFs (or equivalent foreign funds)
Minimum fund subscription: $5 million
No natural person investors permitted
Regulatory Treatment
Capital requirement: higher of
$50k BCR or
EBCM = 6/52 of AAE (approx. half of full-scope)
No mandatory Finance Officer or internal audit
PII is NOT required
Streamlined authorisation
Possible Expansion
FSRA is considering extending this relief to investment managers with a Managing Assets FSP, provided they:
Act only for fund managers
Serve institutional-only funds
Hold no client money or assets
Serve only affiliated firms
Proposal C — Employee Investment Vehicles (EIVs)
A move to formalize employee co-investment structures.
Regulatory Treatment
EIVs will be excluded from the definition of a Fund
Exempt from minimum subscription and client classification rules
Eligibility & Controls
Participation strictly limited to:
Employees/Directors involved in executing the investment strategy
Employees directly advising/influencing decision-making
Fund Managers must:
Disclose full terms and risks to employees
Demonstrate participants’ competence
Obtain written risk acknowledgments
Proposal D — Strengthened Foreign Fund Manager (FFM) Controls
Enhanced local nexus and governance for foreign managers of ADGM-domiciled Domestic Funds.
New Requirements
FFMs may only manage closed-ended QIFs
Appointment of a UAE-resident director for the fund/GP
Appointment of an ADGM-based Fund Administrator (no more overseas alternatives)
Appointment of an ADGM-licensed CSP for service of process
Must submit to ADGM laws and courts
Cannot act as a host manager (no delegation of investment management)
Proposed Flexibility
FSRA may allow FFMs to avoid appointing an Eligible Custodian, depending on asset nature
Request for Industry Feedback
FSRA is actively seeking input on:
Private Credit Funds framework
ADGM Green & Climate Transition Funds
Private REITs
Overall fund vehicle options in ADGM
Conclusion
This consultation marks a significant milestone in ADGM’s evolution as a global funds hub.
With new lighter-touch categories, enhanced investor alignment mechanisms, and stronger controls for foreign managers, the FSRA aims to create a more proportional, competitive, and internationally aligned funds regime.
Feedback window closes: 30 January 2026.A second consultation, focusing on Public Funds, is slated for 2026.
