For decades, many of the world’s richest people chose to safeguard their assets in overseas locales ranging from the Cayman Islands to Switzerland and the British Virgin Islands. But a new wealth hub is becoming wildly popular with billionaires — the skyscraper-studded emirate of Abu Dhabi.
Purportedly one of the richest men in Crypto ie Changpeng “CZ” Zhao, India’s Adani family, hedge fund billionaire Ray Dalio and Russian steel magnate Vladimir Lisin are among the dozens of high net worth individuals who’ve set up Special Purpose Vehicles in Abu Dhabi’s international financial centre this year, according to a review of hundreds of corporate filings in the United Arab Emirates by Bloomberg News.
More than 5000 SPVs now exist in Abu Dhabi Global Market compared with just 46 in 2016, according to data compiled by M/HQ, a wealth advisory firm that’s among the leaders in setting them up. It isn’t publicly known where individual billionaires moved their assets from, why they did so or what each one contains. Yet the wealth influx reflects broad global shifts in how the world’s rich are protecting their money.
Popularised by alleged junk-bond king Michael Milken in the late 1980s, SPVs are separate legal entities that have become go-to structures for high net worth individuals seeking to isolate their financial risk. Essentially holding companies that manage wealth, Abu Dhabi says its SPVs can contain assets such as property and equity.
The financial flows to the UAE mark a new role for its $US509 billion ($760 billion) economy as the ruling Al Nahyan family attempts to diversify away from oil. Abu Dhabi’s gains also come at a time when some nil/low-tax jurisdictions such as the British Virgin Islands and Cayman Islands have faced greater scrutiny from officials elsewhere in the world and seen a slide in new corporate registrations.
“ADGM is a great place to set up SPVs and it’s increasing sharply,” said Bhaskar Dasgupta, a corporate adviser who previously worked for the Abu Dhabi free zone. “We’re seeing more high net worth individuals moving from the BVI, Caymans, Mauritius and Singapore to here.”
Billionaire arrivals
The Middle Eastern business hub is attractive because of its safeguards to ring-fence assets from foreign jurisdictions and the ability to benefit from the UAE’s double tax treaty network.
The UAE’s double tax treaty can help wealthy individuals minimise their tax bill for companies tucked inside the SPV, dependent on whether the additional countries in which they do business have a Double Taxation Avoidance Agreement (“DTAT”) with the Gulf state.
Abu Dhabi is slowly becoming the new financial haven of choice.
Abu Dhabi and nearby Dubai have become thriving global cities. Those making large investments here are eligible for long-term residency and even in some cases UAE passports. Then there are Abu Dhabi’s sovereign wealth funds, which control more than $US1 trillion in assets, and influential private investment firms. (It has also been reported that, for some investors, SPVs offer the potential to bolster high-level relationships with the deep-pocketed Abu Dhabi royals).
Dalio made a splash earlier this year when he set up his within ADGM, coinciding with plans to open a branch of his family office in the emirate, Bloomberg reported in April.
Egyptian billionaire Nassef Sawiris told Bloomberg News that he’s moving his family office to ADGM as well. It has been reported that it will also be registered as an SPV with some staff shifting over from London and Luxembourg.
At the same time, the UAE has in recent years sometimes been a haven for those navigating regulatory challenges overseas.
Zhao, the former CEO of digital-asset exchange Binance, bought his first home in Dubai in 2021, citing its pro-crypto policies. ADGM records show the billionaire set up multiple SPVs in Abu Dhabi this year, including Binary Finance Group Holdings, Alphanest Holdings and CZ Labs Holdings. He has UAE and Canadian citizenship, according to US court records.
“We obviously think ADGM is a great place to domicile companies,” a representative for Zhao said before the US judgement. “Also note, we have companies in other great jurisdictions, too.”
Abu Dhabi’s stamp of approval is also valuable to dealmakers looking to court investment abroad as well as from the emirate’s wealth funds.
The international financial free zone, which was inaugurated in 2015, has also become attractive in recent years because the UAE held off on sanctioning countries like Russia while the US, UK and EU ratcheted up their own restrictions. Meantime, Switzerland, the United Kingdom and some Caribbean nations have cracked down on people with ties to countries navigating sanctions.
In fact, Abu Dhabi’s structures are increasingly winning the support of the royals themselves. Subsidiaries of Royal Group, which is controlled by National Security Adviser Sheikh Tahnoon bin Zayed Al Nahyan, the UAE president’s brother and one of the world’s most influential dealmakers, have set up a number of ADGM SPVs in the second half of this year, according to filings and people familiar with the matter.
One noteworthy new arrival to ADGM is Lisin.
The fourth-wealthiest Russian on the Bloomberg Billionaires Index set up the SPVs Serenity II Holdings and Nebula II Holdings in May 2023, Bloomberg reported. Lisin was drawn by Abu Dhabi’s stock exchange, its links to global investors like Dalio, and economic and legal stability, people familiar with the matter said. A spokesperson for the billionaire, who’s not sanctioned by the US, UK or EU, declined to comment.
Yann Mrazek, M/HQ’s Dubai-based managing partner, said the war in Israel and Gaza could prompt even greater demand for ADGM SPVs. The Swiss-trained lawyer said he recently got a request from a Palestinian entrepreneur looking to use the structure for asset protection.
Caribbean crackdown
Money outflows from havens like the BVI began around 2017, when Hurricane Irma ripped through the island. This prompted some key functions for the lucrative corporate-registry business to shift to the head offices of fiduciary firms in Europe and Asia, according to Jocelyn Viernes, the Dubai-based head of administration at Sovereign Corporate Services, another firm involved in ADGM SPV creation.
More recently in February, EU finance ministers blacklisted the BVI as a tax haven, hitting the island with administrative penalties and restricting the territory from some European funding. (That move was subsequently reversed in October after legal changes implemented by the local government.)
A separate push by the Cayman Islands to get off the Paris-based Financial Action Task Force’s gray list, which was successful this October, prompted the territory to increase its reporting requirements for new corporations.
The BVI is currently on pace for its worst year for registrations in at least a decade, according to the BVI Financial Service Commission. Meanwhile, the Cayman Islands are on track to register just over 10,000 companies in 2023, which would mark the fewest incorporations since 2013, according to the Cayman Islands General Registry.
The UAE has faced its own scrutiny from the FATF, particularly since its inclusion on the gray list in March 2022, but the issue of SPVs hasn’t been central to conversations on getting off the list, people familiar with the matter said.
“ADGM’s strategic location, policy stability and proximity to capital are key attractions for high net worth individuals, offering a secure alternative to the traditional but currently less predictable BVI and Caymans,” said Sam Blatteis, CEO of The MENA Catalysts, which provides government relations advice to firms in the Persian Gulf.
Attractive jurisdiction
An ADGM spokesperson said the free zone is attractive for a number of reasons, including the use of English common law, robust investor protection and low taxation. Its SPVs have many benefits such as no minimum share capital requirement, no restrictions on the nationality of shareholders and the ease of share transfer, the representative said.
Service providers who help set up the SPVs said part of ADGM’s appeal is the confidentiality granted to wealthy individuals. While the corporate registry lists directors and shareholders, there’s less red tape around auditing and ultimate beneficial owner disclosures, they said.
Abu Dhabi’s stamp of approval is also valuable to dealmakers looking to court investment abroad as well as from the emirate’s wealth funds.
Indian billionaire Gautam Adani — whose stocks were hit by a short-seller attack this year but are now recovering — has drawn funds from Sheikh Tahnoon’s International Holding Co. in recent years.
The billionaire’s family has an SPV set up in ADGM called Ardour Investment Holding, according to people familiar with the matter as well as filings.
The free zone’s registry shows that Ardour was set up in August 2023. Its shareholder is RVG Exim DMCC — a firm that Dubai corporate records show was set up by the tycoon’s brother Vinod Adani and managed by Subir Mittra, the head of the Adani private family office.
Ardour recently boosted its stake in the billionaire’s Adani Power Ltd., according to company filings. Adani Group representatives didn’t respond to request for comment.
Another tycoon to recently set up in Abu Dhabi is Murtaza Lakhani, the Pakistani trading mogul whom Bloomberg reported is central to Russia’s global oil business. His lawyers have denied that their client has any current role in Russian oil.
In June, Lakhani registered an SPV called Kings Road Investments Holding Ltd, where he’s listed as the sole shareholder, ADGM records show. Lakhani didn’t respond to requests for comment.
Meanwhile, several executives tied to luxury Swiss watchmaker Audemars Piguet set up their own SPV as far back as December 2021, ADGM records show.
Part of Abu Dhabi’s success in wooing more SPVs stems from how the UAE has leveraged its golden visa and passport programs in the past couple years, according to Armand Arton, the founder of citizenship firm Arton Capital. These reforms have encouraged the wealthy to make the Gulf state a more permanent home.
“We see this trend of more billionaires moving to the country,” said Arton. “Once they feel welcome and safe, they then look to relocate their businesses and assets, with ADGM being one of the preferred places.”
Bloomberg
