The world’s wealthiest individuals have sought to secure their fortunes in overseas havens, from the Cayman Islands to Switzerland to the British Virgin Islands. However, there is a notable shift in this trend, with Abu Dhabi, specifically its international financial center, gaining immense popularity among billionaires.
In a recent review of hundreds of corporate filings in the United Arab Emirates, it was revealed that high-profile figures like cryptocurrency tycoon Zhao Changpeng, the Adani family from India, hedge fund mogul Ray Dalio, and Russian steel magnate Vladimir Lisin are among those who have established special purpose vehicles (SPVs) in Abu Dhabi this year.
The Abu Dhabi Global Market (ADGM) has seen a remarkable surge in the creation of SPVs, with over 5,000 now in existence compared to just 46 in 2016, according to data from M/HQ, a leading wealth advisory firm. The influx of wealth into Abu Dhabi reflects a broader global trend in how the ultra-rich are choosing to protect their assets.
SPVs, originally popularized by junk-bond king Michael Milken in the late 1980s, are separate legal entities that serve as effective structures for isolating financial risk. Abu Dhabi promotes its SPVs as holding companies capable of managing various assets, including property and equity.
This financial shift toward the UAE signifies a new role for its $509 billion economy as the ruling Al Nahyan family endeavors to diversify away from oil. Simultaneously, low-tax jurisdictions like the British Virgin Islands and Cayman Islands face increased scrutiny, leading to a decline in new corporate registrations.
The appeal of Abu Dhabi as a wealth hub lies in its robust safeguards to ring-fence assets from foreign jurisdictions and its advantageous double tax treaty network. The latter allows wealthy individuals to minimize tax liabilities for companies within the SPV, depending on agreements with other countries.
Wealth advisers and international investors praise additional benefits, such as the eligibility for long-term residency and, in some cases, UAE passports for those making substantial investments in Abu Dhabi and nearby Dubai. The region’s sovereign wealth funds, controlling over $1 trillion in assets, along with influential private investment firms, further contribute to its allure.
Recent regulatory challenges overseas have led some individuals to find refuge in the UAE. Zhao Changpeng, former CEO of Binance, set up multiple SPVs in Abu Dhabi, citing the emirate’s pro-crypto policies. This move occurred amid Binance’s legal issues related to anti-money laundering and US sanctions violations.
Abu Dhabi’s success in attracting SPVs has gained royal endorsement, with subsidiaries of the Royal Group, controlled by National Security Adviser Sheikh Tahnoon bin Zayed Al Nahyan, setting up multiple ADGM SPVs in recent months. The UAE’s strategic use of golden visa and passport programs has also played a role in enticing billionaires to make the Gulf state a more permanent residence.
As the global elite seeks a safe haven for their wealth, Abu Dhabi’s rise as a premier wealth hub underscores the shifting dynamics in international finance and the increasing significance of the UAE in the global financial landscape.
(Source: The Straits Times | Bloomberg)
