DFSA Proposes a Significant Overhaul of the DIFC Funds Regime
Updated: Aug 4
On 7 July 2026, the Dubai Financial Services Authority (DFSA) published Consultation Paper No. 173, proposing what is arguably the most significant reform of the DIFC Collective Investment Funds framework since the regime was comprehensively reviewed in 2010.
The proposals reflect the substantial evolution of the DIFC funds and asset management industry and mark a broader shift towards a more flexible, risk-based and disclosure-focused regulatory framework.
Some of the key proposals include:
Moving away from fixed specialist classifications for Qualified Investor Funds (QIFs) and Exempt Funds, providing greater flexibility for hybrid and multi-strategy funds;
Liberalizing the Credit Fund regime, including removing the requirement to invest at least 90% of Fund Property in credit activities and reducing the applicable base capital requirement;
Applying enhanced risk management requirements more broadly across Fund Managers;
Expanding the Venture Capital Fund Manager regime to include managers of funds investing in Venture Capital Funds;
Introducing greater flexibility for master-feeder structures;
Permitting certain employees involved in investment management activities to invest in private funds managed by their employer;
Removing the External Fund Manager regime; and
Extending the first accounting period of a Fund from 12 to 18 months.
Looking beyond the immediate reforms, the DFSA is also seeking industry views on areas that may shape the next phase of the DIFC funds regime, including Fund Tokenization, tokenized Money Market Funds and the potential introduction of a Long-Term Investment Fund regime providing retail investors with access to long-term and illiquid asset classes, subject to appropriate safeguards.
Why does this matter?
Taken together, the proposals represent a fundamental modernization of the DIFC funds framework. For Fund Managers and sponsors, the reforms could significantly increase flexibility in structuring private funds, particularly hybrid and multi-strategy funds, while shifting the regulatory emphasis from prescriptive fund classifications towards risk management, disclosure and appropriate safeguards.
The consultation remains open until 7 September 2026.
Our team continues to monitor these developments and advises Fund Managers, sponsors, and investors on the establishment, structuring and operation of investment funds in the DIFC.
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