By Aditya Gupta
The DIFC funds industry is awaiting the DFSA’s next update on Consultation Paper No. 173 (CP 173), which proposes one of the most substantial reviews of the DIFC’s collective investment fund framework in over a decade. Much of the market discussion has understandably focused on the legal and fund- manager implications: the potential move away from rigid specialist fund classifications, changes to the External Fund Manager regime, enhanced flexibility for master-feeder structures and employee co-investment, and the longer-term possibilities around tokenised fund units.
However, there is another important perspective: what could these changes mean for the day-to-day operation of a fund?
While CP 173 remains a proposal and the final rules are awaited, its direction is clear. The DFSA is considering a more flexible, proportionate and risk-based framework for funds. For managers, this may create greater freedom in how they structure investment strategies. For fund administrators, it reinforces the importance of building an operational framework that can support that flexibility without compromising governance, investor protection or reporting quality.
A move away from prescriptive private-fund categories, for example, could make the DIFC increasingly attractive for hybrid and multi-strategy mandates. A fund may not fit neatly into a single traditional label such as private equity, credit or real estate. But greater investment flexibility must be matched by clear and robust operational processes.
This begins with the fund documentation. The investment policy, valuation methodology, dealing terms, conflicts framework and investor disclosures must accurately reflect how the strategy will operate in practice. It is not enough for a fund to have broad discretion on paper; the fund must also be able to evidence that its operations, records and controls can support the assets and transactions it undertakes.
Valuation is likely to become even more central. A multi-strategy or private-assets fund may hold instruments with differing liquidity profiles, pricing sources and valuation complexity. The administrator’s role is not simply to calculate a NAV. It is to help create a disciplined valuation process, maintain a clear audit trail, coordinate with the investment manager and external valuation providers where relevant, and ensure that exceptions are identified and escalated appropriately.Investor servicing is another key consideration. As structures become more innovative, the quality of the investor register, capital activity records, KYC files, communications and reporting becomes increasingly important. This is particularly relevant where employee co-investment structures, feeder arrangements or different classes of units are involved. A well-run fund should be able to provide investors, auditors and regulators with a consistent and transparent record of ownership, subscriptions, redemptions, transfers and distributions.
The potential removal of the External Fund Manager regime is also likely to lead to broader discussion around substance and local operating capability. For managers that may need to establish or enhance a DIFC presence, the question will not only be about obtaining the appropriate authorisation. It will also be about building an ecosystem that works after launch: fund administration, investor relations support, AML and KYC coordination, governance calendars, regulatory reporting and audit readiness. The fund administrator sits at the centre of many of these workflows. This does not replace the responsibilities of the fund manager, board, custodian, auditor or compliance officer. Rather, it helps ensure that these stakeholders are working from accurate records, clear timetables and reliable reporting.
The discussion around tokenisation offers a similar lesson. Tokenised fund units may eventually change how investors subscribe, transfer and hold interests in a fund. Yet the fundamentals will remain the same: who is the investor, what units do they hold, what restrictions apply, how is the fund valued, and how are transfers controlled and recorded? Technology can improve efficiency, but it cannot substitute for sound fund governance.
As the industry awaits the DFSA’s final position on CP 173, fund managers may benefit from treating this period as an opportunity for operational readiness. Reviewing the operating model early can help identify whether the fund’s documentation, valuation governance, investor servicing, delegation arrangements and reporting processes are ready for a more flexible regulatory environment.
The next phase of the DIFC funds market may be defined by greater choice in fund design. But its long-term credibility will depend equally on the strength of the operating model behind every fund.
At ONS FinServ (DIFC) Ltd., we are preparing for this evolving environment by supporting fund managers beyond the point of launch. Our approach brings together DFSA- regulated fund administration with practical coordination across investor servicing, NAV and valuation processes, AML/KYC, fund reporting, outsourced officer support and ongoing governance. As the DIFC framework develops, our focus remains simple: helping managers build fund operations that are flexible enough for their strategy, while robust enough for long-term regulatory and investor confidence.
