Abu Dhabi Global Market (ADGM) recorded a remarkable 36% increase in assets under management (AUM) during 2025, culminating in 244 funds managed by 171 asset and fund managers and a total of 12,671 active licences by year-end. This expansion, coupled with major regulatory reforms at both the federal and local levels, has elevated the United Arab Emirates (UAE) as a premier global destination for investment funds. The introduction of the new Capital Market Authority (CMA) and revised governance frameworks signal a new era of fund oversight, board composition standards, and risk management in the region. For a comprehensive view of global investment fund developments, visit the Damalion blog.
As international managers and institutional investors—including sovereign wealth funds like the Abu Dhabi Investment Authority (ADIA), with AUM exceeding USD 1 trillion—look to the UAE for opportunity, governance and board oversight have become central to regulatory compliance and operational resilience. This article analyses the latest trends in board composition, independent director requirements, risk management, and compliance officer roles, drawing on CSSF and AIFMD-influenced standards as the UAE strengthens its position in the MENA region.
Regulatory Overhaul: Federal and ADGM Reforms Reshape Board Oversight
The past 18 months have seen sweeping regulatory changes impacting fund governance in the UAE. Most notably, Federal Decree-Law No. 32 of 2025 established the Capital Market Authority (CMA), replacing the former Securities and Commodities Authority (SCA) as the federal regulator from January 2026. Under this new regime, the CMA is empowered to approve board and executive appointments at licensed entities, intervene early in cases of governance failure, and suspend or revoke licences as needed. These powers extend to all onshore and free zone financial entities, including those within Abu Dhabi Global Market (ADGM) and Dubai International Financial Centre (DIFC).
Complementing these federal changes, ADGM’s Consultation Paper No. 12/2025 introduced enhanced governance requirements, including:
- Mandatory appointment of resident directors and local administrators for funds domiciled in ADGM
- Increased transparency around fund valuation, reporting, and depositary oversight
- Greater operational substance and accountability for fund boards
- Strengthened risk management and periodic regulatory reporting for all managers
These changes reflect global standards, notably those underpinning the Luxembourg CSSF and EU AIFMD frameworks, and are designed to instill investor confidence through robust oversight and clear lines of board responsibility. The ADGM’s 2026 ML/TF Risk Assessment for Legal Persons and Arrangements underlines the regulator’s focus on transparency, with legal structures growing by over 70% in two years and risk ratings now closely tied to enhanced supervision and enforcement.
Board Composition: Independent Directors, Fit-and-Proper Standards, and Residency
Effective fund governance in the UAE increasingly hinges on the composition and independence of fund boards. Both ADGM and the new CMA require that boards demonstrate a mix of experience, independence, and local presence:
- Independent directors: ADGM has tightened requirements for independent board members, with a preference for directors resident in the UAE to ensure active oversight and local accountability. This aligns with global best practices and CSSF expectations.
- Fit-and-proper standards: Federal Decree-Law No. 6 of 2025 (Central Bank regulation) extends these standards to banking, insurance, and fund boards, requiring Central Bank or CMA pre-approval for all senior appointments. Candidates must demonstrate integrity, relevant sector experience, and absence of conflicts of interest.
- Director residency: ADGM’s 2025 reforms specifically require a minimum number of resident directors for locally domiciled funds, facilitating regulatory engagement and effective oversight. This is particularly relevant for foreign managers seeking to passport funds into the UAE under the MENA Fund Passporting or QIF Regime.
Specialist independent directors are now seen as critical for ensuring sound risk management and board effectiveness. Damalion assists with independent director sourcing, board composition advisory, and governance framework development tailored to AIFMD and CSSF-aligned standards, helping funds meet these evolving requirements.
Risk Management, Depositary Oversight, and the Role of Compliance Officers
Risk management has become a centerpiece of UAE fund governance, especially in light of ADGM’s rapid AUM growth and the federal push for systemic stability. Key developments include:
- Depositary oversight: ADGM’s revised standards mandate the use of UAE-based depositaries for certain fund categories, with clear board responsibility for monitoring depositary performance and managing custody risks.
- Risk officer functions: Funds are expected to appoint dedicated risk officers or risk committees at board level, responsible for continuous oversight of investment, operational, and financial risks. This is in line with CSSF and AIFMD requirements in Europe.
- Compliance officers: The new AML/CFT decrees (Federal Decree-Law No. 10 of 2025 and Cabinet Resolution No. 134 of 2025) require licensed entities to appoint compliance officers with direct board access. Compliance functions must now proactively manage beneficial ownership disclosures, AML/CFT monitoring, and reporting to the Financial Intelligence Unit—now with expanded enforcement powers.
Senior management and directors face increased personal liability for regulatory breaches, and the use of nominee arrangements for beneficial ownership has been curtailed. This places renewed emphasis on board training, robust documentation, and active engagement with legal and compliance advisers.
Market Outlook: International Standards, UAE Fund Passporting, and Future Trends
The convergence of ADGM and federal reforms with international governance standards has positioned the UAE as a credible hub for cross-border fund distribution and MENA Fund Passporting. Notable global entrants in 2025—such as Cantor Fitzgerald, BBVA, Arab Bank Switzerland – Gulf, and Plenary ME Infrastructure—demonstrate continued institutional confidence in the UAE’s evolving regulatory landscape. Sovereign investors, including ADIA and the Dubai Investment Fund (DIF), further anchor the jurisdiction’s reputation for stability and transparency.
Key trends shaping the near-term outlook include:
- Increased demand for truly independent directors and specialist board committees
- Adoption of digital governance tools for board meetings, documentation, and regulatory reporting
- Greater scrutiny of service provider and depositary arrangements, particularly for cross-border and alternative fund structures
- Continued alignment with international benchmarks, including CSSF governance, AIFMD substance, and enhanced AML/CFT controls
For more insights on ESG and sustainable finance integration, see ESG & Sustainable Finance Funds in the UAE: Regulation, Innovation, and the Road to 2030. For a detailed discussion of ManCo and AIFM structuring, refer to Management Companies & AIFMs in the UAE: Structure, Regulation, and Growth in a Booming Asset Management Hub.
The UAE’s transformation into a best-in-class fund jurisdiction underscores the strategic importance of robust board oversight, director independence, and proactive risk management for fund managers, GPs, LPs, and service providers across the MENA region and beyond.
Damalion supports international investors, entrepreneurs, and family offices navigating the Global investment funds .
