ADGM's new fund manager regime: Finding the right route for your funds business

The Financial Services Regulatory Authority (FSRA) of Abu Dhabi Global Market (ADGM) has introduced a more tailored regulatory framework for fund managers, creating new routes for smaller private fund managers and managers focused exclusively on institutional investors.

The changes, which took effect on 16 September 2026, introduce the Sub-Threshold Fund Manager (STFM) and Institutional Fund Manager (IFM) categories, alongside changes affecting venture capital managers, employee investment structures and foreign managers of ADGM funds. 

For managers considering ADGM, the reforms create greater flexibility. But they also make the choice of regulatory structure increasingly important. The right route will depend not simply on the funds being launched today, but on the manager's investor base, fundraising strategy and plans for growth.

A tailored route for emerging managers

The STFM framework is designed for managers of smaller private funds. It applies where aggregate Committed Capital across the funds managed does not exceed USD 200 million, and is limited to eligible closed-ended, non-retail funds. 

STFMs benefit from a significantly more proportionate regulatory model. Among other things, they are not required to appoint a Finance Officer or maintain an internal audit function and are subject to a USD 50,000 base capital requirement without an expenditure-based capital minimum. They must, however, maintain professional indemnity insurance. 

For emerging sponsors, this can make ADGM a more accessible jurisdiction from which to establish a private funds business. The key issue is scale. An STFM must apply to the FSRA to vary its Financial Services Permission before accepting commitments that would take it above the USD 200 million threshold. Accordingly, a manager expecting its fundraising to move beyond USD 200 million should consider early whether the STFM route fits its medium-term plans, rather than looking only at the size of its first fund.  

A dedicated route for institutional capital

The new IFM framework takes a different approach. Rather than focusing on the size of the manager's funds, it is built around the nature of their investors.

An IFM may manage Institutional Funds, being QIFs or qualifying Foreign Funds with a minimum subscription of USD 5 million that do not accept subscriptions from natural persons. Institutional Funds may be open-ended or closed-ended. Importantly, there is no equivalent USD 200 million ceiling on the amount of capital that an IFM can manage.

The framework is aimed at managers raising exclusively from institutional investors, such as sovereign wealth funds. Like STFMs, IFMs need not appoint a Finance Officer or maintain an internal audit function. Unlike STFMs, they are not required to maintain professional indemnity insurance, and their capital requirement is the higher of USD 50,000 and 6/52nds of annual audited expenditure (compared with 13/52nds for a full-scope Fund Manager).

This potentially makes the IFM particularly relevant to global asset managers establishing an ADGM platform around a concentrated institutional investor base. But flexibility comes with an important boundary: the institutional investor criteria need to remain appropriate as the platform develops.

What about managers based outside ADGM?

International managers can continue to manage Domestic Funds in ADGM without establishing an ADGM-based fund manager, but the FFM framework now requires greater local infrastructure.

Under the revised rules, FFMs are required to appoint an ADGM-based Fund Administrator and an ADGM-licensed Corporate Service Provider, together with other requirements applying under the revised framework. For existing FFMs, the FSRA has confirmed that it will apply the Fund Administrator and Corporate Service Provider requirements, with a transition period running until 31 March 2027. 

For an international sponsor considering ADGM, there is consequently a more strategic question to answer: is it preferable to manage an ADGM fund from an existing overseas platform, or does establishing an ADGM-regulated management business better support the sponsor's longer-term regional plans?

There is no single answer. The appropriate structure will depend on the sponsor's investor base, anticipated fundraising, local operating model and plans for the region.

Venture capital and employee participation

The reforms also bring VCFMs within the STFM framework. The previous USD 100 million per-fund cap has been replaced by the STFM’s USD 200 million aggregate Committed Capital threshold, and VCFMs are now subject to the USD 50,000 base capital requirement for the first time. Existing VCFMs have until 31 March 2027 to transition to the new requirements. VCFMs retain their reduced FSRA fees, which are not extended to STFMs generally.

The framework also facilitates employee investment in private funds managed by their employer, including through qualifying Employee Investment Vehicles. 

These changes should be considered alongside the wider reforms when structuring a new platform, particularly where employee participation or co-investment forms part of the manager's strategy.

Choosing the right structure

The significance of the new framework is not simply that ADGM has created two new regulatory categories. It is that managers now have more choice over how their regulatory structure reflects their business.

For a smaller private funds sponsor, the STFM regime may provide a proportionate starting point. For a manager focused exclusively on institutional capital, the IFM route may offer a better fit. And international managers can continue to consider the FFM route for closed-ended QIFs without relocating the management business itself to ADGM. Existing ADGM fund managers that meet the eligibility criteria may also be able to move to STFM or IFM status through the FSRA’s declaration process, rather than a full variation of permission. However, those choices should be made with the future platform in mind. Fundraising targets, investor eligibility, successor funds, co-investment arrangements and the manager's intended presence in the region can all affect which route is appropriate.

For existing managers, the reforms also provide an opportunity to consider whether their current permissions remain the best fit for their business. The FSRA has expressly provided a process for existing Authorised Fund Managers wishing to move to STFM or IFM status. 

How we can help

The new framework gives fund managers greater choice, but selecting the right route requires looking beyond the immediate fund launch. Investor profile, fundraising ambitions, future funds and the manager’s intended presence in the region can all affect which structure is the right fit.

Clyde & Co’s Financial Services Regulatory team advises fund managers, sponsors and investors on establishing and operating funds and fund management businesses in ADGM and across the UAE. We can assist with assessing the most appropriate regulatory route, structuring new platforms, obtaining or varying FSRA permissions and navigating the transition to the new framework.