The new billionaires’ wealth haven is not where you think
The richest man in crypto, Changpeng Zhao, and hedge fund billionaire Ray Dalio are among dozens who’ve set up special purpose vehicles in Abu Dhabi this year
By Ben Bartenstein
For decades, many of the world’s richest people chose to safeguard their assets in overseas locales ranging from the Cayman Islands to Switzerland and the British Virgin Islands. But a new wealth hub is becoming wildly popular with billionaires – the skyscraper-studded emirate of Abu Dhabi.
The richest man in crypto, Changpeng “CZ” Zhao, India’s Adani family, hedge fund billionaire Ray Dalioand Russian steel magnate Vladimir Lisin are among the dozens of high net worth individuals who’ve set up special purpose vehicles in Abu Dhabi’s international financial centre this year, according to a review of hundreds of corporate filings in the United Arab Emirates by Bloomberg News.
More than 5000 SPVs now exist in Abu Dhabi Global Market compared with just 46 in 2016, according to data compiled by M/HQ, a wealth advisory firm that’s among the leaders in setting them up.
It isn’t publicly known where individual billionaires moved their assets from, why they did so or what each one contains. Yet the wealth influx reflects broad global shifts in how the world’s rich are protecting their money.
Popularised by junk-bond king Michael Milken in the late 1980s, SPVs are separate legal entities that have become go-to structures for high net worth individuals seeking to isolate their financial risk. Essentially holding companies that manage wealth, Abu Dhabi says its SPVs can contain assets such as property and equity.
The financial flows to the UAE mark a new role for its $US509 billion ($747 billion) economy as the ruling Al Nahyan family attempts to diversify away from oil.
Billionaire arrivals
Abu Dhabi’s gains also come as some low-tax jurisdictions like the British Virgin Islands and Cayman Islands have faced greater scrutiny from officials elsewhere in the world and seen a slide in new corporate registrations.
“ADGM is a great place to set up SPVs and it’s increasing sharply,” said Bhaskar Dasgupta, a corporate adviser who previously worked for the Abu Dhabi free zone. “We’re seeing more high net worth individuals moving from the BVI, Caymans, Mauritius and Singapore to here.”
The Middle Eastern business hub is attractive because of its safeguards to ring-fence assets from foreign jurisdictions and the ability to benefit from the UAE’s double tax treaty network, according to people with direct knowledge of the matter, who requested anonymity as the matter is private.
The UAE’s double tax treaty can help wealthy individuals minimise their tax bill for companies tucked inside the SPV, dependent on whether the additional countries in which they do business have an agreement with the Gulf state.
Wealth advisers and international investors, many of whom spoke on the condition of anonymity to discuss confidential business dealings, also point to a string of benefits that the emirate offers.
Abu Dhabi and nearby Dubai have become thriving global cities. Those making large investments here are eligible for long-term residency and even in some cases UAE passports. Then there are Abu Dhabi’s sovereign wealth funds, which control more than $US1 trillion in assets, and influential private investment firms.
For some investors, SPVs offer the potential to bolster high-level relationships with the deep-pocketed Abu Dhabi royals, according to people familiar with the matter.
Dalio made a splash earlier in 2023 when he set up his within ADGM, coinciding with plans to open a branch of his family office in the emirate, Bloomberg reported in April. A representative didn’t respond to requests for comment.
Egyptian billionaire Nassef Sawiris told Bloomberg News that he’s moving his family office to ADGM as well. It will also be registered as an SPV with some staff shifting over from London and Luxembourg, according to a person with direct knowledge of the matter.
At the same time, the UAE has in recent years sometimes been a haven for those navigating regulatory challenges overseas.
Zhao, the former CEO of digital-asset exchange Binance, bought his first home in Dubai in 2021, citing its pro-crypto policies. In November, Binance and Zhao pleaded guilty to anti-money laundering and US sanctions violations under a settlement with the US.
ADGM records show the billionaire set up multiple SPVs in Abu Dhabi this year, including Binary Finance Group Holdings, Alphanest Holdings and CZ Labs Holdings. He has UAE and Canadian citizenship, according to US court records.
“We obviously think ADGM is a great place to domicile companies,” a representative for Zhao said before the US judgement.
The international financial free zone, which was inaugurated in 2015, has also become attractive in recent years because the UAE held off on sanctioning countries like Russia while the US, UK and EU ratcheted up their own restrictions.
Legal stability
Meantime, Switzerland, the United Kingdom and some Caribbean nations have cracked down on people with ties to countries navigating sanctions.
In fact, Abu Dhabi’s structures are increasingly winning the support of the royals themselves. Subsidiaries of Royal Group, which is controlled by National Security Adviser Sheikh Tahnoon bin Zayed Al Nahyan, the UAE president’s brother and one of the world’s most influential deal makers, have set up a number of ADGM SPVs in the second half of this year, according to filings and people familiar with the matter.
One noteworthy new arrival to ADGM is Lisin.
The fourth-wealthiest Russian on the Bloomberg Billionaires Index set up the SPVs Serenity II Holdings and Nebula II Holdings in May 2023, Bloomberg reported.
Lisin was drawn by Abu Dhabi’s stock exchange, its links to global investors like Dalio, and economic and legal stability, people familiar with the matter said. A spokesperson for the billionaire, who’s not sanctioned by the US, UK or EU, declined to comment.
Yann Mrazek, M/HQ’s Dubai-based managing partner, said the war in Israel and Gaza could prompt even greater demand for ADGM SPVs.
Indian billionaire Gautam Adani – whose stocks were hit by a short-seller attack this year but are now recovering – has drawn funds from Sheikh Tahnoon’s International Holding in recent years.
The billionaire’s family has an SPV set up in ADGM called Ardour Investment Holding, according to people familiar with the matter as well as filings. Adani Group representatives didn’t respond to request for comment.
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