Middle East hubs are proving to be the sweet spot for family capital

7 June 2022

Middle East hubs are proving to be the sweet spot for family capital

7 June 2022

By Heather Tibbo, Group Head and Daniel Channing, Director

In February this year, the Dubai International Finance Centre (DIFC) reported its highest ever annual revenue and operating profit.

Meanwhile, in Saudi Arabia, Riyadh is focused on morphing from an oil and gas powerhouse into a business, commerce and finance hub, with experts forecasting that Saudi Arabia will become the preeminent finance hub in the Middle East within the next three years.

On the ground

This is a strong indication that key hubs in the Middle East, such as the DIFC and Riyadh, are being successful in diversifying their proposition and setting out their stalls as global players in cross-border investment.

From an international service provider perspective, it’s long been the case that centres in the Middle East have been active in the private client and family office market – but this is now broadening with investors in the region looking for increasingly sophisticated support to enable them to achieve their global investment aspirations.

At the same time, investors and family offices elsewhere in the world are looking more and more at the cross-border structuring and professional support services available through Middle East hubs like the DIFC and Riyadh to support their international ambitions too.

As local, regional and global investors increasingly put their faith in these Middle East hubs, it is our responsibility as service providers with the experience and expertise in cross-border structuring to support that trend with the same quality service and knowledge that we have applied in other markets too.

It has certainly been the message from family offices that the Middle East market is incredibly busy. Our experience on the ground is that the DIFC and Riyadh are seen as a nexus for investment into key growth markets, specifically Africa and Asia – providing a route from North to South (the UK/Europe to Africa), and from West to East (the US to Asia).

As well as the geographical positioning that plays out well for this sort of structuring opportunity, it is the tax neutral environment they provide that also lends itself perfectly to straightforward collective investment structures – an area where we are seeing particular activity at the moment amongst family offices.

Private equity and venture capital type deals are areas of particular activity, with family offices globally still sitting on significant amounts of dry powder, waiting to be allocated to the right target and put to work. The message is clear, though – it has to be the right target.

Which is why having a tried and tested route to market that can enable them to react quickly when the right opportunity comes along is so important – and the hubs in the Middle East are rising to that challenge.

As well as providing good structuring, attractive tax environments and good mechanisms for upstream investment vehicles needing neutral ground, hubs in the region are significantly enhancing their governance and regulatory frameworks and investing heavily in their hard and soft infrastructures – bolstering their regional stock exchanges, for example, to support listed fund business.

This is where there is significant opportunity for offshore vehicles in supporting the evolution of these hubs. We frequently see, for example, Jersey structures being used to complement activity in the Middle East, whilst the experience in centres like Jersey have in governance and cross border regulation is hugely prized by families and complements the work being done by advisors in the Middle East too.

As hubs in the Middle East continue to evolve and transition at pace from domestic to international centres, IFCs like Jersey can play a positive and complementary role. The fact that Jersey has been visiting the Middle East region for many years, has had a presence in the UAE since 2011 and is ramping up its visibility in Saudi Arabia, puts it in a strong position to support this trend.

The future

Both the DIFC and Riyadh have hugely ambitious but highly achievable growth plans for the years ahead.

2021 saw the approval, for instance, of the DIFC’s Strategy 2030, a new strategy that reflects the DIFC’s role in supporting sustained economic growth. It embraces new legislation relating to the expanded duties and responsibilities of the DIFC and promotes the values of efficiency, transparency and integrity, whilst also placing a real emphasis on innovation.

In Saudi Arabia meanwhile, the Vision 2030 strategy sets out an equally ambitious growth plan, with an aim to rebalance its economy, diversify into new sectors, from financial services to high-end manufacturing, tourism, entertainment and culture.

It’s clear that the Middle East, in particular the UAE and Saudi Arabia, provides significant opportunities to support family office structuring and private market cross-border investment, and the pace of change over the coming years will undoubtedly accelerate.

As a result, there are collaborative opportunities for professionals in IFCs like Jersey who are familiar with the Middle East region and who have so much experience in cross border structuring, to support that growth and achieve mutually beneficial outcomes – for IFCs like Jersey, for those hubs in the Middle East, and of course clients.