The Middle East is set to become increasingly active in the global hedge fund industry, according to new study.

The UAE and Qatar will be playing potentially dominant roles in the region’s hedge fund activity, according to the research conducted by Mirabaud, a banking group founded in 1819.

Worldwide, total industry assets under management stand in excess of $2.68 trillion. Mirabaud forecasts that hedge funds will become increasingly attractive to the region’s ever-more sophisticated regional investors, especially given the high levels of excess liquidity in the Middle East.

“Globally, hedge fund centres have emerged from the most sophisticated financial centres, such as New York, London, Hong Kong and Singapore. The relevant defining attribute of each of these locations is the maturity of their capital markets. While Middle East capital markets have not yet reached the same level of maturity, they are quickly moving in the right direction,” said Mirabaud (Middle East) Limited chief executive officer Gilles Rollet.

“In the UAE and Qatar, in particular, the markets and the level of regulatory oversight continue to achieve significant progress. The Dubai International Financial Centre has even taken the step, through its regulating body the Dubai Financial Services Authority, to create a Hedge Fund Code of Practice, giving legal weight to the effort to make Dubai a centre in the hedge fund industry,” he said.

Increased institutional investment in the regional capital markets, especially the UAE, is another sign of the maturity of markets, Mirabaud’s research found. Globally, at a time when most traditional investments are generating low levels of returns, institutional investors are increasingly attracted to alternative asset classes such as hedge funds, Mirabaud said in a statement.

“A hedge fund-friendly environment can be seen to emerge from a region with high levels of excess liquidity and strong degrees of professionalism among regulators and service providers. The Middle East is well known for its access to enormous amounts of excess liquidity due to the high price of oil,” said Rollet.

“In the UAE and Qatar, we are now seeing professionalism from both regulators and service providers grow steadily. Both countries have governments that are committed to forging legal structures that allow for increasing financial sophistication in their respective financial districts. If current trends continue, these two countries will undoubtedly emerge as hedge fund centres, and given enough time, will stand on par with Singapore, Hong Kong and even London and New York,” he added. – TradeArabia News Service