Home Hedge Funds How finance’s two hottest cities stack up

How finance’s two hottest cities stack up

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For a long time, the tale of two cities in finance was either between London and New York, or between Hong Kong and Singapore. But while those debates are still raging – and probably will never stop raging – a third rivalry has quietly emerged in the background: that between Abu Dhabi and Dubai.

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The emergence is rather recent by any metric. The Dubai International Finance Centre (DIFC) commenced operations in 2004; the Abu Dhabi Global Market (ADGM) in 2013.

That’s a far cry from the City of London’s Roman or even Wall Street’s colonial heritage, but that doesn’t mean the stakes are small. Brevan Howard, one of the world’s largest hedge funds, runs $10bn (around a third of its total assets) from Abu Dhabi, more than it’s allocated to its presence in either London or New York. And Brevan isn’t the only fund interested; Abu Dhabi was in talks last month aiming to attract 125 global firms to its sandy shores, including more hedge funds and asset managers.

Dubai, by contrast, has been doing this for a while. It’s the junior emirate to Abu Dhabi in the UAE’s relatively flat hierarchy, but it’s not lacking in either firepower or creativity in maintaining its spot as the UAE, the GCC, and the Middle East’s top global city.

But really, what is the difference between the two? Well, there are a few.

Young people prefer Dubai, families prefer Abu Dhabi

This is probably the marked difference between the two cities. It might not be Las Vegas, but Dubai is very much the country and region’s sin city – wired, connected, and (comparatively) liberal. Abu Dhabi is more… Normal.

“If you’re relocating with your family, Abu Dhabi is a great place. Safe, quieter. Rents are cheaper. Fantastic quality of life. And it’s a lot more of your typical 9-to-5, 8-to-5 work. Whereas Dubai, if you’re single, is non-stop. It’s 24 hours,” explained Gareth El Mettouri, Middle East director of recruitment consultant Robert Half.

Jonathan Berry, head of recruitment consultant Robert Walters’ presence in the region, agreed. “Dubai is fast-paced, super busy, lots of traffic and lots of exciting businesses. It’s really starting to feel like a big city.” One of the best, although more subtle, signs to its global footprint is the agglomeration of international businesses and brands in the city – Berry points to EY and Julius Baer. It’s also worth noting that both he and El Mettouri are based in the city, as opposed to Abu Dhabi.

It’s hard to measure exactly how “international” each city is, but there’s a relatively fair metric: the size of their respective special economic zones. Abu Dhabi has only has around 13,000 workers in the ADGM, compared to around 41,000 in the DIFC.

Dubai being a more mature financial center also has its downsides for an expat, however. The DIFC’s properties have an occupancy rate above 99% – the city is still building and expanding its mass transit systems, but it’s straining. Traffic has gotten noticeably worse, and property prices (including rent) have made previous qualities of life unsustainable, pushing expats further and further away from the DIFC. Abu Dhabi and the ADGM don’t have those problems.

Financial services are mostly in Dubai, but the world is changing

Dubai had, and still has, certain advantages over Abu Dhabi. “It was the first free zone to be governed by England and Wales law. So, you saw a lot of large, traditional, investment banks based in the DIFC,” El Mettouri said. Abu Dhabi’s ADGM is governed by English law now, too.

That makes integrating a satellite office with a London-based EMEA HQ much easier than in jurisdictions where potentially very different legal systems have to be navigated for financial services firms, especially in Sharia-governed or Sharia-influenced states such as Saudi Arabia or the UAE.

With finance as a market cornered, Abu Dhabi went down a different route: “After a lot more of the high growth new technologies: tech, digital currencies, digital platforms,” El Mettouri explained. “Although they are flexible.”

That flexibility comes from the huge amount of money available to Abu Dhabi, which even Dubai would balk at. The Abu Dhabi Investment Authority has just shy of $1tn in AUM, per the Sovereign Wealth Fund Institute. Mubadala, also owned/operated by Abu Dhabi, has another $300bn or so. Dubai has deep pockets, $340bn deep, but it can be outbid.

And finance firms have been attracted to Abu Dhabi as a consequence. Ray Dalio, founder of hedge fund Bridgewater, opened a satellite of his family office in the city. Morgan Stanley is in the city now, too.

Abu Dhabi as a whole still has some way to go to catch up to Dubai, however, aside from the ADGM being a third of the size of the DIFC. But money talks.

The difference isn’t as big as you think

Despite the differences, the two cities are more similar than they are different. They are, after all, less than 100 miles apart, and the playbook to attract foreign investors is well-established.

For one, companies in both cities are generous with allowances – these differ more between companies than they do between the emirates. Although Abu Dhabi is more family-oriented, more senior staff in both cities can expect education allowance for children. There’s usually a housing allowance in both cities too.

Companies in the UAE also offered, once upon a time, “free” flights back home for expats, with business class for more senior staff. These are generally, although not entirely, a thing of the past, especially the former method of simply signing a blank cheque worth the value of a flight back home.

Both cities are interested in global talent, regardless of its origin. Although recruiting in the city has a natural bias for Anglophone talent, both due to colonial history and current Pax Americana, it doesn’t mind where that Anglophone talent comes from; Berry noted that he’s had “people moving from across Europe, Australia, the UK, Hong Kong, and Singapore.” The lack of America in the list is notable.

The rapidly changing nature of Dubai and Abu Dhabi also means that the two likely don’t want to be the same. Young professional in Dubai grows up, gets a job in Abu Dhabi. There’s less of a reason to leave the UAE than before. “Dubai is no longer a hardship post,” El Mettouri explained. “You may not be able to save as much as previously, and bank as much as you previously had done, but people are here for lifestyle.”

It’s also worth noting that, at the end of the day, the UAE is an absolute monarchy governed by Sharia-derived law. Even if it’s incredibly tolerant of expats and what expats do in private, there are still expectations on visitors to not stumble around drunk, consume drugs, and that sort of thing. That being said, the northern emirate of Ras Al-Khaimah is opening a casino.

The looming wildcard: Saudi

Although Dubai and Abu Dhabi are the main contenders in the GCC for foreign interest, they’re not the only ones. And even combined, they don’t have the deepest pockets in the region.

Since Saudi crown prince Mohammed Bin Salman (MBS) came to power, things have changed for the kingdom. The religious police were abolished, women were permitted to drive, and concerts are now allowed. The country is more open to the world, and the world is more open to it.

“The Ronaldo effect and other major sporting events have put Saudi Arabia on the map.” Berry said. The country is the fastest growing recruitment market in the Middle East for Robert Walters, he added. “People are now taking note of the projects that are happening in Saudi Arabia, and it’s becoming a desirable place to work. Where else in the world are they creating new cities?”

Saudi Arabia is the fastest growing recruitment market for Robert Walters, Berry said. The fact that the city has four special economic zones likely helps, as does the trillions of dollars being thrown around for megastructures and the seemingly infinite depth of both Aramco’s pockets and MBS’ ambitions.

But even with Saudi Arabia changing, it’s still decades behind the UAE. It also has a very different approach – the country “has recently announced if you want to work with these large gigaprojects, you now need to have a regional HQ based in Saudi,” El Mettouri said. “There’s a push and a pull at the moment.”

Saudi’s plan seems to be working, however. Over 200 corporations moved their HQs to the kingdom in time for a deadline related to bidding on government contracts, including Deloitte, PwC, and Northern Trust.

All that being said, Saudi Arabia is in a very different position to the UAE. Saudi Arabia has 30m Saudis; the UAE barely has a million Emiratis and relies on expats in almost every area of economic life. As such, don’t expect a move to Riyadh or Jazan on the cards anytime soon.

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