DIFC Fund Due Diligence: What Investors Should Verify Beyond Regulatory Status

The Dubai Financial Services Authority is consulting on significant changes to the DIFC Collective Investment Fund framework as Dubai’s asset-management sector continues to expand.

Consultation Paper 173 represents the DFSA’s most substantial review of the framework since 2010. The proposals include a more flexible risk-based approach to private funds, changes affecting investment-manager authorisation, fund structures and employee participation, together with early consideration of areas such as fund tokenisation and access to longer-term illiquid investments.

Responses are open until 7 September 2026.

For investors, family offices and professional advisers, the consultation also provides a useful reminder of a broader principle.

Regulatory status is an important part of assessing a fund or manager, but it should not be the only check.

Before significant capital is committed, investors may also need to establish who controls the relevant entities, how the fund is structured, which service providers are involved, whether conflicts exist and whether material representations can be independently supported.

Regulatory Status Is Only One Part of Due Diligence

The DFSA regulates financial services conducted in or from the Dubai International Financial Centre.

Investors considering a DIFC-linked fund should therefore verify the regulatory position of the relevant firm directly through authoritative sources.

However, confirmation that a manager or other firm is regulated does not establish:

• That a particular investment is suitable
• That a fund will perform as expected
• That every commercial representation is accurate
• That the underlying assets carry limited risk
• That conflicts of interest do not exist
• That capital can always be redeemed
• That losses cannot occur

Fund due diligence therefore needs to look beyond the existence of a licence.

The objective is to understand the people, organisations, structure and commercial assumptions behind the investment.

Identify the Exact Fund and Manager

Investment materials may refer to several entities.

These could include:

• The fund
• Investment manager
• General partner
• Investment adviser
• Administrator
• Custodian
• Depositary
• Auditor
• Placement agent
• Parent or holding company

The first step is to establish which legal entity performs each role.

Relevant checks may include:

• Legal names and jurisdictions
• Incorporation details
• Ownership and control
• Directors and senior management
• Regulatory status
• Previous names
• Connected entities
• Relevant corporate history

Similar company names or branding should not be assumed to mean that all entities are part of the same regulated group.

Where money is being transferred, the recipient should also be compared with the entity identified in the subscription or investment documentation.

Examine the People Behind the Fund

Fund performance ultimately depends in part on the people making investment, governance and operational decisions.

Due diligence may therefore consider the backgrounds of:

• Founders
• Portfolio managers
• Directors
• Investment committee members
• Senior executives
• Key advisers

Relevant enquiries can include:

• Previous employment
• Historic fund involvement
• Directorships
• Regulatory history
• Insolvency
• Material litigation
• Professional disciplinary matters
• Adverse media
• Connected business interests

The existence of litigation, a failed business or adverse reporting does not automatically make someone unsuitable.

Context, outcome, relevance and timing matter.

The purpose of the review is to identify material information that may require further explanation before an investment decision is made.

Verify Track Record Claims

A strong historic performance record can be a significant part of a fund’s investment proposition.

Investors should establish precisely what is being claimed.

Questions may include:

• Was the individual responsible for the stated performance?
• Was the track record achieved at the same organisation?
• Was it generated using the same investment strategy?
• Were the results audited?
• Are figures gross or net of fees?
• Does the performance relate to a fund, model portfolio or personal account?
• Are only selected successful periods being presented?

A manager may genuinely have worked at a successful investment firm without personally being responsible for all of the performance attributed to them.

Independent verification helps distinguish institutional reputation from the individual or team’s actual track record.

Understand the Fund Structure

Fund structures can become complex, particularly where several jurisdictions or investment vehicles are involved.

The DFSA’s current consultation itself reflects the evolution of fund structures, including hybrid and multi-strategy approaches and master-feeder arrangements.

Investors should understand:

• Which entity they are investing into
• Where that entity is established
• Which entity owns the underlying investments
• How capital moves through the structure
• Which company receives management or performance fees
• Whether related parties provide services
• Which jurisdiction governs investor rights
• What happens if a key entity fails

Complexity is not evidence of misconduct.

It can, however, make it more important to understand the economic and legal relationships between the parties.

Check Independent Service Providers

Fund managers often rely on external organisations for important operational and control functions.

These may include administrators, auditors, custodians, valuers and legal advisers.

Investors should establish whether those organisations:

• Exist
• Have the stated relationship with the fund
• Are appropriately authorised where required
• Are independent from the manager where independence is expected
• Have relevant experience
• Have any significant regulatory or reputational concerns

A professional service provider’s logo appearing in investment material should not be treated as confirmation of a relationship without further verification where the relationship is material to the investment decision.

Examine Conflicts and Connected Parties

Related-party transactions can create additional risk.

Examples might include:

• A fund investing in companies connected to its manager
• Assets acquired from related businesses
• Services supplied by entities owned by directors
• Introducers receiving substantial commissions
• Valuations provided by connected parties
• Loans to related companies

These arrangements are not necessarily improper.

The important questions are whether they are disclosed, appropriately governed and consistent with the fund’s stated strategy.

Corporate research may help identify ownership or management connections that are not obvious from marketing material alone.

Look Beyond the Headline Asset

Some investment structures are promoted around tangible or specialist assets such as:

• Real estate
• Private companies
• Infrastructure
• Private credit
• Commodities
• Technology ventures
• Digital assets
• Other illiquid investments

The existence of the underlying asset does not establish that the investment is low risk.

Investors may still need to understand:

• Who owns it
• How it has been valued
• Whether financing or security exists over it
• How liquidity will be generated
• Whether valuations are independent
• How the fund intends to exit the investment
• Whether related parties are involved

This is particularly important where redemption depends on assets that cannot easily be sold.

Regulatory Claims Should Be Checked Precisely

Statements such as “DFSA regulated”, “DIFC authorised” or “regulated in Dubai” should be checked carefully.

Investors should identify:

• Which entity is regulated
• Which activity it is permitted to conduct
• Whether the investment is within the scope of that activity
• Whether restrictions apply
• Whether the contact details match official records

A genuine regulatory reference should not be taken as verification of unrelated companies, introducers or websites.

The DFSA’s current consultation is intended to align fund requirements more closely with risk while improving clarity and investor protection. It does not remove the need for investors to understand the specific parties and structure they are dealing with.

When Enhanced Due Diligence May Be Appropriate

A deeper review may be justified where:

• The investment is substantial
• The structure spans several jurisdictions
• Ownership is complex
• Significant related-party transactions exist
• The fund invests in illiquid assets
• The manager has a limited operating history
• Important performance claims are difficult to verify
• High commissions or introduction fees are involved
• Material adverse information has emerged

Due Diligence Services may support the independent verification of companies, individuals, ownership structures and material representations before a significant investment or commercial relationship is entered into.

Conflict Advisory Group’s role is to establish and assess relevant factual information. We do not provide investment advice or determine whether a particular fund is suitable for an investor.

What Investors Should Preserve

Where questions emerge after an investment has been made, retain:

• Subscription agreements
• Offering documents
• Investor presentations
• Due diligence materials
• Emails and messages
• Payment instructions
• Bank and transaction records
• Valuation statements
• Fund reports
• Redemption requests and responses

These records can help establish what was represented, which entities were involved and how the investment developed over time.

Where a dispute or suspected fraud arises, legal advisers should determine what additional evidence-preservation or disclosure steps may be appropriate.

UAE Fund and Investment Due Diligence Support

Conflict Advisory Group supports investors, family offices, businesses and professional advisers conducting due diligence on UAE-linked investment opportunities and counterparties.

Depending on the scope, our work may include:

• Fund-manager and principal research
• Corporate ownership and connected-party intelligence
• Director and professional-history enquiries
• Regulatory and litigation research
• Adverse-media assessment
• Cross-border corporate research
• Verification of material commercial claims
• Service-provider and counterparty research
• Clearly sourced reporting for professional review

Findings distinguish verified information from allegations, potential connections and matters that remain unresolved.

Due diligence cannot guarantee investment performance, prevent future misconduct or identify every undisclosed issue.

Its purpose is to reduce uncertainty and provide a stronger factual basis for decision-making.

Discuss a UAE-Linked Investment or Fund

If you are considering a substantial DIFC or UAE-linked fund investment and require independent verification of the manager, principals, corporate structure or relevant counterparties, contact Conflict Advisory Group.

We can assess what level of corporate intelligence and due diligence may be proportionate to the value, structure and risk of the proposed investment.

Complete the enquiry form below to discuss your requirements.