Capital, connectivity and opportunity: The UAE as the next strategic frontier for Canadian funds

Canada–UAE investment ties are entering a period of accelerated expansion, underscored by the recent Canada–UAE Investment Summit in Abu Dhabi in November 2025, where Prime Minister Carney from Canada, along with senior leaders from the UAE, signed a new bilateral investment treaty and formally launched negotiations for a Canada-UAE Comprehensive Economic Partnership Agreement (CEPA). The signing of the agreement represents the most substantive development in the economic relations between the two countries in more than a decade and sets the groundwork for increased capital flows and investment activity.

There is a compelling opportunity for Canadian private equity and venture capital fund managers to leverage the new momentum in bi-lateral trade and investment between the UAE and Canada. The UAE is emerging not only as a major global allocator of institutional capital but also as a strategic hub for expansion into the Middle East, Africa, South Asia, and Central Asia. Establishing a presence in the UAE positions Canadian GPs and managers to explore JV partnerships and commercialization opportunities for their portfolio companies with leading regional conglomerates and influential family offices, invest in high-growth companies emerging from the region’s rapidly expanding innovation ecosystem, and diversify their LP base through direct engagement with sovereign wealth funds, regional family offices and a broader pool of Middle-Eastern institutional investors.

This trend is evident in prominent Canadian investment firms expanding into the Abu Dhabi Global Market (ADGM), an example of a broader strategic pivot among North American funds towards the Gulf and one that more Canadian funds should embrace in today’s evolving geopolitical environment.

At the center of this opportunity are the ADGM and the Dubai International Financial Centre (DIFC), the UAE’s two internationally recognized financial free-zones, each based on English common-law, tax-efficient structures, and sophisticated funds regimes, making each highly attractive platforms for Canadian GP’s and managers seeking to expand their global footprint.

Why the UAE should become a priority for Canadian fund managers

A number of strategic drivers should compel Canadian PE and VC firms to anchor part of their global growth strategy in the ADGM or the DIFC.

Canadian sector capabilities accessing regional capital: The UAE sits at the centre of a highly concentrated and active sovereign capital ecosystem in the Middle East also catering to Kuwait, Oman, Qatar and Saudi Arabia. For Canadian fund managers, establishing a local presence, through either a DIFC or an ADGM structure, significantly enhances proximity, visibility, and credibility with Middle Eastern institutional and sovereign investors as well as influential family offices as it signals a long-term commitment to the region. A presence in the ADGM or the DIFC enhances the likelihood of securing anchor commitments, follow-on investments, and strategic co-investments.

Collectively, these institutions manage trillions of dollars in deployable capital and are accelerating investment across sectors where Canadian expertise becomes immediately relevant. Across Saudi Arabia, the UAE, Qatar, and Oman, national programs are directing significant capital into renewables, hydrogen, advanced mobility, industrial decarbonization, and digital infrastructure, sectors where Canadian pension-backed funds and private investors have long-established operating and underwriting expertise. Canadian venture capital firms similarly offer strong capabilities in climate tech, advanced industrials, AI, Fintech and broader digital innovation, all of which align with the region’s diversification and innovation agenda. This creates a compelling opportunity for Canadian sponsors to leverage their proven technical and execution capabilities into regional deal flow, while establishing a foothold in markets backed by substantial, long-term capital.

Global-standard legal, regulatory, and governance frameworks: ADGM and DIFC operate under English common-law systems, with independent courts and internationally recognized regulators (the FSRA and the DFSA respectively), offering the legal certainty and governance standards expected of leading global financial centres. For Canadian GPs and managers accustomed to stable, rules-based oversight, the familiarity of these regulatory frameworks provides a regime comparable to North America, Luxembourg, Ireland, or Cayman, but with more pragmatic, commercial-oriented regulators whose mandate is focused on growing their domestic funds market through the administration of enablement-driven regulation. This explains why ADGM and DIFC are increasingly mentioned alongside Luxembourg, Ireland, Delaware, and Singapore as global hubs for fund domiciliation, especially for GPs seeking access to Middle East capital.

Tax efficiency: Both the ADGM and DIFC provide tax-efficient frameworks for investment funds. Properly structured funds under the UAE tax regime can neutralize corporate tax on qualifying income and neither regime imposes capital gains tax. This simplicity allows Canadian sponsors to operate regional funds without dealing with complex local tax issues in the UAE (subject to tax advice – which DLA Piper offers in the UAE).

Fast and flexible fund formation: Both ADGM and DIFC have developed comprehensive, multi-tiered fund regimes that offer distinct categories, each with different regulatory requirements, tailored for professional and institutional investors, including VC funds, Exempt Funds, and Qualified Investor Funds. These regimes are designed to be efficient, flexible, and facilitate a faster fund launch than traditional fund jurisdictions. From a regulatory perspective, both the ADGM and the DIFC have established Foreign/External Fund Manager frameworks that permit managers from “eligible” jurisdictions to oversee locally domiciled funds without obtaining full authorization, provided that they meet specific regulatory criteria. These frameworks avoid duplicative licensing requirements and represent a potential fast-track path for Canadian GPs to operate funds in both the ADGM and DIFC. Moreover, both the DFSA and the FSRA have proven to be highly receptive to constructive industry feedback aimed at proactively reducing regulatory burden and enhancing international credibility.

Regional expansion and the Indo-Pacific: Having a base in the UAE gives Canadian fund managers a practical gateway into fast-growing markets not only in the Middle East, but also in Africa, India, and Southeast Asia. Abu Dhabi and Dubai sit within a four-hour flight radius of more than 3 billion consumers and several of the world’s fastest-growing economies. The UAE is emerging as a key hub for the Indo-Pacific, supported by growing investment ties with major markets such as India, Indonesia, Malaysia, Singapore, South Korea, and other fast-growing economies in the region. This aligns well with Canada’s Indo-Pacific Strategy, which prioritizes deeper commercial engagement with India and Southeast Asia.

Increasing competition and First Mover Advantage: U.S., European, and Asian funds are rapidly setting up ADGM and DIFC structures to capture sovereign capital and regional mandates. Many of the world’s largest alternatives managers have already built significant local teams, recognizing that proximity to Gulf LPs and policymakers is becoming a prerequisite for meaningful capital allocation and deal flow and both the ADGM and the DIFC show double- and triple-digit year-on-year AUM growth, with aggressive growth forecasts to boot.

For Canadian sponsors, this heightened competition creates a narrowing window to define their regional presence and secure early positioning with regional LPs. As the region continues to institutionalize, ADGM and DIFC are emerging as strategic platforms for capital access and deal origination. Canadian managers that establish an early presence will be better positioned to access and cultivate long-term regional relationships and access local deal flow, which may become more challenging as more global firms enter the market.

Potential fund structures and key considerations

Canadian fund sponsors could pursue one of three main structuring approaches when establishing a presence in the ADGM or the DIFC.

Feeder funds for GCC investors: A feeder fund domiciled in the ADGM or the DIFC would enable sovereign wealth funds and regional LPs to access a Canadian flagship fund through a regulated fund platform in the UAE. As a result, AML/KYC, eligibility checks, and subscription documents can be completed under familiar ADGM/DIFC processes (that also gives access to a UAE wide passporting arrangement for marketing purposes), avoiding the additional disclosures and cross-border compliance reviews ordinarily required when investing directly into a foreign fund. Strategically, establishing a local feeder fund can also strengthen on-the-ground engagement with local LPs who may prefer investing in locally domiciled funds. Of note is that each of the DIFC and the ADGM have their own dedicated courts and arbitration frameworks, closely mirroring best in class dispute resolution mechanisms found in the world's leading financial centers.

Parallel funds for regional deployment or LP alignment: Parallel funds domiciled in the ADGM or the DIFC can operate alongside a Canadian master or global fund, allowing GPs to offer terms that better fit the needs of Middle Eastern LPs. They also help meet regional expectations around co-investment by giving Middle Eastern investors a dedicated vehicle through which they can participate in specific transactions, and they simplify the process of deploying capital into local deals. At the same time, the GP can keep the overall fund platform aligned across different jurisdictions, ensuring that strategy, economics, and governance remain consistent between the ADGM/DIFC vehicle and the main Canadian or global fund.

SPVs and co-investment platforms: Certain sovereign wealth funds prefer to participate on a deal-by-deal basis rather than through a master fund. The ADGM and the DIFC offer flexible managed SPV structures that make it straightforward to set up co-investment vehicles, with relatively light regulatory requirements. These SPVs also offer a practical structure to carry out regional M&A and direct investment by holding each investment in a separate, self-contained entity. This gives investors a clean entity, keeps liabilities contained in the SPV, and avoids the complications that arise when multiple deals or investors are pooled in a single vehicle.

Successfully setting up in the UAE requires careful attention to securities, tax, regulatory, marketing, and governance considerations across both jurisdictions. While the ADGM and the DIFC offer tax-neutral structures, Canadian GPs must manage issues such as GP (and staff) residency, Canadian tax treatment of carry, and ensuring that management and control remain appropriately structured.

Marketing rules across the GCC are complex and differ significantly from Canada’s exempt market framework. Marketing in certain jurisdictions, particularly Saudi Arabia and the UAE may require approvals or local licensing (although a passporting arrangement does exist between the DIFC, the ADGM and mainland UAE, available to funds established in the UAE only).

DLA Piper and next steps

DLA Piper, with integrated teams in Canada and the UAE, combines deep-bench regional regulatory and tax insight with cross-border transaction and fund formation experience and execution capability, enabling us to advise Canadian clients on structuring, establishing, and operating funds in the region – with the added certainty that DLA Piper is a premier litigation firm with a proven track record across the region.

We would welcome the opportunity to discuss how the DIFC and the ADGM platforms can be utilized to support your investment strategy, facilitate capital raising, and position your firm for regional growth.

Contact the authors, Raj Dewan, Adrianus Schoorl and Ishita Kashyap to find out how DLA Piper can support you.