Following the publication of Consultation Paper No. 12 of 2025, the Financial Services Regulatory Authority (the FSRA) of the Abu Dhabi Global Market (the ADGM) has now finalised a series of changes to its funds and fund management framework, the aim of which is to make the regime more proportionate for smaller fund managers, institutional-only platforms and certain affiliated managers. These changes also update the treatment of venture capital structures, employee participation vehicles and foreign fund managers.
For sponsors considering the ADGM as a fund domicile or fund management hub, these reforms are not only regulatory housekeeping: they create more tailored entry points into the regional market and, in some cases, should reduce the mismatch between regulatory burden and business model.
1. The ADGM is now offering a more segmented licensing model for fund managers
The FSRA has introduced new specialised categories of managers, being:
- the Sub-Threshold Fund Manager (STFM), including the Venture Capital Fund Manager (VCFM) sub-category
- the Institutional Fund Manager (IFM); and
- the Institutional Fund Asset Manager (IFAM).
Different types of fund managers will be regulated in a way that reflects the scale of assets managed, the investor profile and the risk characteristics of the platform.
The STFM, IFM and IFAM frameworks operate with streamlined regulatory requirements, recognising the lower risk associated with eligible managers.
The STFM (and the VCFM sub-category) provides certain regulatory exemptions for managers of smaller funds, whereas the IFM and IFAM frameworks apply respectively to managers of Institutional Funds exclusively targeting institutional investors (i.e., sovereign wealth funds or other similar institutional investors) and Group members of such an IFM managing assets of the corresponding Institutional Funds.
Why it matters
The practical benefit is a lower barrier to entry and a faster route to authorisation for these managers seeking to use these frameworks. Managers whose funds are smaller, whose investors are exclusively institutional, or whose strategies are narrowly defined can now access a regime calibrated to their risk profile rather than absorbing the compliance cost of a full-scope licence built for larger, more complex platforms. For first-time sponsors, captive managers and institutional-only houses, that makes the ADGM a materially more competitive domicile from day one.
2. Emerging private capital managers may find the ADGM easier to access
The new STFM category targets managers of closed-ended, non-retail funds where aggregate committed capital (across all funds managed by the STFM) does not exceed US$200 million. An STFM may also apply for permissions to advise on investments or credit and to arrange deals in investments, in each case limited to co-investments in the funds it manages. An STFM must not operate as a 'host' fund manager.
In practical terms, the STFM category gives smaller private fund sponsors a more realistic pathway into ADGM without stepping straight into a heavier full-scope compliance model.
Why it matters
Sponsors launching debut or relatively concentrated strategies often want an institutional domicile and brand, but not the cost base of a framework designed for larger, more diversified managers. The ADGM is now more explicitly accommodating that part of the market.
3. Venture capital managers have been given more room to scale
The FSRA has also revised the VCFM framework. The previous US$100 million total subscription cap has been removed and replaced with an aggregate committed capital cap (across all funds managed by the VCFM) of US$200 million, bringing the venture regime closer to the broader sub-threshold approach. The FSRA's supplementary guidance also confirms that a VCFM can apply for permissions to advise on investments or credit and to arrange deals in investments, in each case limited to co-investments alongside a Venture Capital Fund that it manages.
Why it matters
The FSRA has recognised that venture capital managers may need a lighter-touch platform, but still want enough headroom to raise successive vehicles, sidecars or co-investment capital without tripping into a more burdensome regime too early. Authorisation and supervision fees for a VCFM are capped at US$10,000, which adds to the appeal of the VCFM regime and should make the ADGM a more attractive option for scaling managers still below the size of institutional alternatives platforms.
4. The institutional fund manager route offers a lighter framework for purely institutional capital
The IFM regime is designed for managers whose funds are aimed exclusively at institutional investors. A fund is an Institutional Fund if it:
- is a Qualified Investor Fund (QIF) or Foreign Fund;
- its minimum subscription threshold is $5 million; and
- it does not accept subscriptions from natural persons.
The FSRA's supplementary guidance also confirms that the updated rules relating to Employee Investment Vehicles (EIVs) can facilitate employee investment in an IFM-managed fund without jeopardising the manager's IFM status. The IFM regime should appeal to managers of sovereign, pension and insurance capital, but it is not a flexible catch-all for any professional investor product.
Why it matters
For managers whose investor base is exclusively institutional, the IFM framework offers a materially lighter compliance model – with streamlined organisational requirements, lower regulatory cost and a faster route to authorisation compared with a full-scope fund management licence. The EIV carve-out adds further flexibility by letting employees invest alongside institutional capital without jeopardising the manager's IFM status.
That said, the benefits come with strict eligibility criteria. Managers using feeder or parallel structures, family-office capital, founder money or other mixed investor channels will need to confirm early in the fund-structuring process that those features do not undermine institutional-only status.
5. The reforms make employee alignment structures more practical alongside institutional fund vehicles
An EIV used to facilitate employee or director investment into an Exempt Fund or QIF may be excluded from the definition of a “Fund”, with minimum subscription thresholds disapplied if the relevant conditions are met.
Those conditions include limits on who may participate and disclosure, assessment and acknowledgment requirements. As noted above, for IFMs, the supplementary guidance confirms that the EIV rules allow employees to invest in an IFM-managed fund without affecting the manager's IFM status – providing a useful structuring option for firms seeking to run incentive alignment structures alongside institutional fund vehicles.
Why it matters
This is useful for sponsors seeking genuine internal alignment with flagship strategies who do not want each participating employee to subscribe individually at institutional ticket sizes, particularly addressing a prior need to look outside of the ADGM when structuring employee incentive arrangements. For firms thinking about GP commitment programmes, team economics and retention structures, the FSRA has made the framework more workable, and sponsors will need to ensure that appropriate conditions are built into subscription processes and compliance controls.
6. Foreign Fund Managers are subject to meaningful safeguards
The updated rules revise the regime applicable to Foreign Fund Managers wishing to manage ADGM Domestic Funds without obtaining a full ADGM licence. These provide that a Foreign Fund Manager may manage an ADGM fund that is a closed-ended QIF, provided that the the Foreign Fund Manager:
- is subject to regulation by a Financial Services Regulator in a Recognised Jurisdiction;
- subjects itself to ADGM laws and regulations and the jurisdiction of the ADGM Courts, so far as they apply to its activities relating to the ADGM fund;
- appoints an ADGM-licensed fund administrator or trustee, and an Eligible Custodian, before commencing management of the ADGM fund;
- appoints a natural person who is a UAE resident to the board of the fund (or the board of the general partner);
- appoints an ADGM-licensed corporate service provider as agent for receipt of process; and
- does not engage, or cause the fund to engage, a third party to provide investment advice or manage fund property.
Why it matters
This regime gives established offshore and onshore managers a structured pathway to manage ADGM-domiciled vehicles without relocating their entire platform. However, the conditions are detailed: the requirement for a UAE-resident board member, the obligation to appoint an ADGM[YW1.1]-licensed administrator or trustee and custodian, the prohibition on sub-delegating investment management or advisory functions and the requirement to subject the manager to ADGM laws and the jurisdiction of the ADGM Courts mean that this is not a light-touch arrangement.
Notably, the prior regime, which allowed a Foreign Fund Manager to rely on the laws of a Zone 1 or Recognised Jurisdiction or on laws otherwise considered equivalent to those of the ADGM, have been removed. Managers contemplating this route will therefore need to map their existing governance and service-provider arrangements against these requirements early in the structuring process.
7. “Lighter touch” does not mean “light on governance”
A key feature of these specialised regimes is that they are intended to operate with streamlined requirements reflecting lower-risk or more narrowly defined activities. Whilst the FSRA has introduced key exemptions for STFMs, IFMs, IFAMs and VCFMs from certain regulatory requirements, the FSRA emphasises that the goal remains proportionate regulation rather than deregulation. Guidance also makes clear that STFMs and IFMs are expected to disclose their regulatory status and any Financial Services Permission (FSP) restrictions in the offering documents of the funds, on the basis that this is material to an investor's decision to invest.
Why it matters
Managers should resist the temptation to read these categories as a shortcut around core regulatory requirements and investor protections. Even where specific controlled-function or internal framework requirements are eased, matters such as conflicts, valuation oversight, delegation, investor disclosure and perimeter discipline remain central. In practice, whilst the reforms may lower the infrastructure burden, they do not reduce the importance of getting governance right.
8. Existing ADGM managers should treat this as a restructuring opportunity
The FSRA provides that:
- existing Authorised Persons seeking to change status to STFM, IFM or IFAM can apply using the prescribed FSRA forms; and
- there is a transition period until 31 March 2027 in relation to the new rules for VCFMs and Foreign Fund Managers.
Why it matters
Firms already operating in the ADGM should proactively assess whether the revised framework warrants a change of regulatory status, a variation of their FSP, updates to offering documents, a refresh of investor disclosures or a rewrite of internal policies and compliance procedures.
Bottom line
The FSRA's overarching message is clear: it intends to compete for a wider range of fund managers by offering a more proportionate regulatory framework, without compromising on investor-protection standards. For private capital sponsors, the reforms open up more tailored pathways for emerging managers, institutional-only platforms, venture capital vehicles, employee alignment structures and foreign fund managers seeking to manage ADGM-domiciled vehicles. However, capturing these benefits requires careful eligibility analysis from the outset, as the advantages of each new category are contingent on remaining within clearly defined thresholds and investor parameters.
White & Case has a wealth of experience advising fund managers on ADGM regulatory matters and is well placed to help sponsors assess how these reforms affect their structures, licensing strategy and ongoing compliance obligations.
Lana Akkad (Associate, White & Case, Dubai) co-authored this publication.
White & Case means the international legal practice comprising White & Case LLP, a New York State registered limited liability partnership, White & Case LLP, a limited liability partnership incorporated under English law and all other affiliated partnerships, companies and entities.
This article is prepared for the general information of interested persons. It is not, and does not attempt to be, comprehensive in nature. Due to the general nature of its content, it should not be regarded as legal advice.
© 2026 White & Case LLP
