The Dubai Financial Services Authority (DFSA) has launched a wide ranging consultation proposing the biggest changes to the Dubai International Financial Centre's (DIFC) collective investment funds framework since 2010. Published as Consultation Paper No. 173 on 22 July 2026, the proposals are designed to modernise the regime, sharpen investor protection and keep the DIFC competitive against other global fund domiciles, according to reporting from Pinsent Masons.
A Shift From Fixed Categories to Risk-Based Rules
At the centre of the consultation is a move away from rigid fund classifications. Today, DIFC funds are sorted into fixed specialist categories such as private equity, hedge, credit, property and money market funds, each carrying its own layer of prescriptive requirements. The DFSA now wants to replace much of that structure with a more flexible, disclosure
led framework focused on risk rather than fund label, particularly for funds marketed to professional investors.
Marie Chowdhry, a UAE based financial regulation and fintech expert at Pinsent Masons, described the consultation as one of the most important developments in the DIFC investment funds landscape in recent years, noting that it signals a clear shift towards a more principles based, risk focused approach that still preserves investor protections.
Key Proposed Changes at a Glance
| Area | Current Rule | Proposed Change |
|---|---|---|
| Fund classification | Fixed specialist categories (private equity, hedge, credit, property, money market) | Risk based, disclosure led framework for professional investor funds |
| Master feeder structures | Narrow eligibility | Broader availability across fund types |
| External fund manager regime | Allows overseas managers to operate without a local authorised presence | Proposed for removal entirely |
| Employee investment | Restricted | Employees directly involved in managing a fund could invest in it, subject to conditions |
| Credit fund lending rule | Must invest at least 90 percent of fund property into credit | Requirement proposed for removal, with other investor safeguards retained |
Lighter Rules for Credit Funds and Fund Managers
The consultation gives particular attention to the DIFC's fast growing credit fund sector. Alongside removing the 90 percent lending threshold, the DFSA is proposing to lower the higher base capital requirements that currently apply to credit fund managers and to scrap dedicated application and annual fees for credit funds. David Young, an international asset management and investment funds expert at Pinsent Masons, said removing the external fund manager regime could bring more regulatory certainty, though it may carry real cost implications for overseas managers who currently rely on DIFC structures without a local presence.
Tokenisation and a Possible Retail Route to Illiquid Assets
Beyond the formal rule changes, the DFSA is using the consultation to gauge industry appetite for two longer term ideas. The first is a long term investment fund regime that could eventually let retail investors access asset classes such as infrastructure, real estate and private companies that are currently reserved for professional investors, drawing on lessons from Europe's ELTIF and the UK's LTAF regimes. The second is the tokenisation of fund units and money market funds, an area where Pinsent Masons says it is already seeing rising client interest across the UAE, UK, Ireland and Luxembourg. Both ideas remain at the consultation stage and are not yet formal policy.
Who Should Pay Attention
The proposals are relevant to fund managers, asset managers, administrators, custodians, investors and legal advisers operating in or considering the DIFC. The consultation stays open until 7 September 2026, and Young recommends firms assess how the changes could affect their existing or planned fund structures, licensing arrangements and governance frameworks before responding.
The push for a more internationally aligned funds regime mirrors wider momentum across Dubai's economy, most recently visible in our coverage of how UAE Expands Global Trade Network with 37 CEPAs as Talks Continue with 20 More Countries, another sign of the emirate positioning itself against global benchmarks.
