Carlyle embraces DIFC fund regime

The firm’s latest MENA vehicle, the first of its kind, opens up certain sectors for Gulf-based LPs in Carlyle’s $500m MENA fund.

The Carlyle Group has become the first fund management firm to take advantage of new rules in Dubai by setting up Carlyle MENA Investment Advisors, a vehicle formed under the Dubai International Financial Centre’s collective investment funds regime.

The vehicle will not raise any new capital, but will instead form part of Carlyle’s existing 2009 vintage $500 million Carlyle MENA fund, which is mandated to invest across the Middle East, North Africa, Turkey and the Levant.

DIFC: A much improved regime

The aim of the DIFC fund is primarily to give GCC-based Carlyle investors the flexibility to invest in a broader array of sectors. There are restrictions in some Gulf States regarding which sectors can be invested in by foreign funds. The new DIFC fund will allow GCC-based Carlyle investors to invest in these restricted sectors, which vary from state to state and include sectors like media and banking. Non-GCC LPs will not participate in these restricted deals.

The new collective investment funds regime was enacted in the DIFC in July 2010 and is designed to “stream-line” the regulatory process for funds catering exclusively for sophisticated investors, bringing the state into line with regimes in the US and elsewhere, Carlyle said in a statement.

Commenting on the new DIFC fund regime, Walid Musallam, managing director and head of Carlyle’s MENA team, said it was “a testament to the DIFC being a domicile of choice for private equity firms.”

Chézard Ameer, a Dubai-based international funds partner at Gibson Dunn, said the new DIFC fund rules were “a great improvement” over the previous regime.

“This is certainly not the only funds regime in the GCC,” he said, “but it is a great improvement over the previous iteration and is now a legitimate option as a domicile for funds with a predominantly GCC investor base targeting GCC assets.”

“It remains to be seen, however, if foreign LPs wanting exposure to the MENA region will feel comfortable committing to DIFC-domiciled funds,” Ameer added.

Carlyle is one of the world’s largest private equity investors and currently manages more than $97 billion across various alternative asset classes.

Law firm Taylor Wessing advised on the establishment of Carlyle MENA Investment Advisors.