MFA submitted a comment letter to the Dubai Financial Services Authority (DFSA) in response to the call for evidence on private credit.
MFA applauds the DFSA’s collaborative efforts to reshape their private credit regulation, believing reforms can unlock billions of dollars in investments to businesses in the region.
The comment letter also responds to the specific questions raised in the call for evidence:
- MFA does not believe it appropriate to separately regulate credit funds as a specialist class of funds with specific requirements applicable only to them. Investors in alternative asset funds traditionally are sophisticated, institutional investors more than capable of assessing the credit, liquidity, interest rate, and related risks that accompany this long-term investment.
- With our recommendation that credit funds are not specifically called out for particularised regulation, alternative asset managers generally should be permitted to invest in private credit assets, subject to general requirements regarding the naming of the fund and its strategy, and how it is marketed to investors.
- MFA supports additional flexibility in the types of private credit investments permitted for funds pursuing private credit strategies, including international trade finance instruments such as letters of credit and financial guarantees. Private credit funds also should be permitted to acquire interests in loans that were originated elsewhere, in addition to originating loans themselves.
- MFA supports eliminating the 10% leverage limit for private credit funds given the robust risk management practices at alternative investment funds and, importantly, the counterparties through which they trade.
- MFA is of the view that there is a role for open-ended credit funds but notes the importance of liquidity management.
