Abu Dhabi emerges as new haven for the ultra-wealthy

Abu Dhabi has emerged a new wealth-hub for those looking to protect their assets in overseas locales, according to corporate filings reviewed, reported Bloomberg on Monday.

Surpassing the likes of Switzerland, the Cayman Islands and the British Virgin Islands, individuals such as India’s Adani family, hedge fund billionaire Ray Dalio and Russian steel magnate Vladimir Lisin are among the many high net worth individuals who have set up special purpose vehicles (SPVs) in Abu Dhabi’s international financial center this year, added the report.

Abu Dhabi, Dubai among top destinations for ‘digital nomads’

An SPV, also called a special purpose entity (SPE), is a subsidiary created by a parent company with the purpose of isolate financial risk.

Its legal status as a separate company makes its obligations secure even if the parent company goes bankrupt, making it a uniquely bankruptcy-remote entity.

Furthermore, if accounting loopholes are exploited, these vehicles can become a financially devastating way to hide company debt, as seen in 2001 in the Enron scandal.

Currently, more than 5,000 SPVs now exist in Abu Dhabi Global Market (ADGM) compared with just 46 in 2016, added Bloomberg, citing data compiled by M/HQ, a wealth advisory firm specializing in setting such up.

The filings do not elaborate on where individual billionaires moved their assets from, not what each one contains.

This turn for Abu Dhabi’s $509 billion economy also come at a time when some low-tax jurisdictions like the British Virgin Islands and Cayman Islands have faced greater scrutiny from officials elsewhere in the world as well as seen a slide in new corporate registrations.

“ADGM is a great place to set up SPVs and it’s increasing sharply,” Bhaskar Dasgupta, a corporate adviser who previously worked for the Abu Dhabi free zone was quoted as saying by Bloomberg.

“We’re seeing more high net worth individuals moving from the BVI, Caymans, Mauritius and Singapore to here.”

Canvas Gallery represents Pakistan at 15th edition of Abu Dhabi Art

Tax leverage

Abu Dhabi is also attracting high-net worth individuals due to safeguards to ring-fence assets from foreign jurisdictions and the ability to benefit from the UAE’s double tax treaty network, added Bloomberg, citing sources with direct knowledge of the matter.

Further incentives include Abu Dhabi’s sovereign wealth funds, which control more than $1 trillion in assets, as well as influential private investment firms.

Abu Dhabi’s ADGM financial centre to expand by ten times

The golden route

Dubai and Abu Dhabi have also emerged as attractive investment locales for those looking for long-term residency and even UAE passports.

Part of Abu Dhabi’s success in attracting more SPVs is directly correlated to 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.

Such 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,” Arton was quoted as saying by Bloomberg.

“Once they feel welcome and safe, they then look to relocate their businesses and assets, with ADGM being one of the preferred places.”

For some investors, SPVs also offer the potential to bolster high-level relationships with Abu Dhabi royals, added Bloomberg citing sources familiar with the matter.

Jan-Jun 2023: Dubai sees 52% YoY surge in Golden Visas

The international financial free zone – inaugurated in 2015 – has also been attractive in recent years as the UAE held off on sanctioning countries like Russia while the US, UK and EU increased their restrictions.

Meanwhile, Switzerland, the United Kingdom and some Caribbean nations have cracked down on people with ties to countries navigating sanctions, according to Bloomberg.

For perspective, the Cayman Islands are on track to register just over 10,000 companies in 2023 – the fewest incorporations since 2013 – added Bloomberg, citing the Cayman Islands General Registry.