Abu Dhabi regulator opens door for private credit funds under new rules

The Financial Services Regulatory Authority (FSRA) of Abu Dhabi Global Market (ADGM) today (5 May) enacted amendments to its regulatory framework enabling ADGM-based collective investment funds to invest in credit by originating and participating in credit facilities.

In a statement, the FSRS said these enactments follow the publication of Consultation Paper No. 8 in 2022, seeking views concerning the establishment and operation of Private Credit Funds.

Typical credit funds earn returns from investment in loans, either by way of origination, participation or purchase, or a combination of the foregoing. Their popularity has grown due to the relative attractiveness of returns on lending compared to other asset classes, also being partly driven by the opportunity to finance dynamic, growth-stage companies.

The framework for Private Credit Funds will improve access to alternative financing for private enterprises, driving innovation, productivity growth and competitiveness in the small and medium-sized business sector.

The amendments necessary to permit Private Credit Funds to operate in or from ADGM belong to the Financial Services and Markets Regulations (FSMR), the Fund Rules (FUNDS), Islamic Finance Rules (IFR) and the Glossary Rules (GLO) of the FSRA.

The final form of the updated regulatory framework in this area benefitted from the industry feedback received through the previously published consultation paper, alongside dialogue with various fund industry participants and their respective advisors.

Emmanuel Givanakis, CEO of the ADGM FSRA, said: "The global private credit market has experienced significant growth in the past decade. Providing the opportunity for fund managers to create Private Credit Funds in ADGM supports the FSRA's objective to continue to enhance and develop ADGM's comprehensive and vibrant financing ecosystem, for both professional investors and those companies seeking funding.

"It will help support and bolster the growth of such companies, while providing greater investor choice and ultimately contribute to the growth and diversification of the economy of Abu Dhabi, the UAE, and the broader region."