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Bahrain Leads Regional Hedge Fund Sector

by Phillip Morton, Investors

08 November 2007

Bahrain has emerged as the Gulf region's dominant force in the hedge fund industry, a Middle Eastern hedge fund conference heard earlier this week.

Addressing the third annual Hedge Fund Review Middle East Summit, which opened at the Ritz-Carlton Bahrain on Tuesday, Central Bank of Bahrain Executive Director Abdul Rahman Al Baker told participants that the new regulations introduced in June 2007 will mean that Bahrain will continue to remain the domicile of choice for hedge funds in the region.

While the Gulf emirate of Dubai has raised its profile hugely as the pre-eminent financial centre between Europe and East Asia, Bahrain has emerged as the region's major player in terms of investment fund business, and it has quietly gone about developing a new legal framework which has attracted 57 hedge funds to its register, managing $2.6 billion in assets. By contrast, Dubai has only one registered hedge fund, according to Gulf Daily News.

In the 1990s, Bahrain was the first regional jurisdiction to create a credible regulatory framework for the regulation and supervision of collective investment schemes. Bahrain’s success to date as the region’s leading funds centre is a testament to that commitment. As at end-April 2007, nearly 2,300 funds were authorized by the CBB, of which 102 were locally domiciled funds – by far and away the largest concentration of locally domiciled funds in the GCC.

New regulations issued earlier this year provide for higher risk and volatile instruments, which has seen the emergence of a home-grown industry of hedge funds, derivatives and other alternative investment instruments.

The conference, sponsored by Investcorp, which manages $6.4bn in hedge fund assets, was attended by more than 300 leading investors from various Gulf nations, in addition to hedge fund managers from the Middle East, North Africa, Europe, Asia and the United States.

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