Ask a private credit manager how investors are supposed to choose between senior and subordinated exposure, or between three-year and seven-year duration, and the answer usually involves unit classes. The fund will offer several. Investors will select the one matching their appetite. The vehicle grows because it accommodates more of them.
It is a reasonable-sounding answer, and it does not work. Unit classes do not allocate risk. They allocate cost. A manager who builds a credit platform on that assumption will discover the problem at the point where it matters most, which is when one strategy sours and investors in the others find they were never insulated from it at all.
The instrument that does the work is the cell. Once that is understood, the interesting question is not how to draft the classes but where to domicile the fund, because Saudi Arabia, ADGM and the DIFC have each ended up holding a different piece of the same structure. This article sets out what each offer, what each is missing, and which gap looks likeliest to close first.
What a Unit Class Actually Does
The clearest statement of the limitation comes from the managers themselves. Apollo Diversified Credit Fund, which offers six classes, records in its financial statements that each class represents an interest in the same assets of the fund, and that the classes are identical but for sales charge structures and ongoing service and distribution charges. The fund’s own accounts bear this out: in its 2023 financial year, Class A, Class C and Class I each carried a net asset value of $21.79.
The pattern holds across the market. Blackstone Private Credit Fund, the largest vehicle of its kind, reported inception-to-date annualised returns through December 2025 of 9.0% for Class S, 9.2% for Class D and 9.9% for Class I. Roughly ninety basis points separate the best and worst outcomes, and every basis point of it is fee load. Same borrowers. Same seniority. Same duration. The class an investor holds determines what they pay, not what they are exposed to.
This is not a drafting failure. In registered fund structures it is a design constraint, and managers who want genuine differentiation of exposure have to look to a different instrument.
What a Cell Does
The DFSA articulated the distinction with unusual clarity when it consulted on introducing protected cell companies to the DIFC funds regime. Under a conventional umbrella, the regulator observed, each sub-fund is notionally distinct from the others but is not a separate legal entity, with the consequence that assets and liabilities in one sub-fund are not insulated from those of any other sub-fund, nor from the liabilities of the umbrella itself. The protected cell structure, by contrast, provides legal segregation of the assets and liabilities of each cell.
That paragraph is the whole point. A notional sleeve is a description. A cell is a ring-fence.
Two forms are available in both ADGM and the DIFC, and the choice between them carries real cost consequences. A protected cell company and its cells form a single fund, with each cell constituting a sub-fund of it: one authorisation, one administrator, one auditor, several ring-fenced compartments. An incorporated cell company works differently. Each cell is a separately incorporated entity with its own legal personality, able to contract in its own name and hold assets in its own right, and each must be registered or notified as a separate fund. The ICC offers stronger segregation and greater flexibility. It also multiplies the regulatory perimeter, because several funds under a common platform is not the same proposition as one fund with several compartments.
The Constraint Both Free Zones Share
Here the analysis turns on a single requirement that is easy to overlook. CIR 13.12.2 provides that a DIFC Credit Fund must be an Investment Company or an Investment Partnership, must be a Closed-ended Fund, and must be either an Exempt Fund or a Qualified Investor Fund. ADGM imposes a comparable closed-ended restriction under FUNDS 4.1.7. Neither centre presently permits a perpetual, evergreen credit fund which is, notably, the format into which the global private credit industry has raised the overwhelming majority of its recent capital.
That requirement then interacts with the cell structures in a way that separates the two centres.
ADGM: The Cheaper Cellular Route, in Principle
ADGM permits umbrella structures in which each sub-fund carries its own investment objective and policy, and allows both PCCs and ICCs, so that the assets and liabilities of each cell are legally segregated while the vehicles remain under common management. Establishing either requires the Regulator’s consent. Creating a new cell requires approval for most domestic funds, but for a Qualified Investor Fund the burden falls to notification, with a minimum of seven calendar days before the cell is created. Fees are assessed per cell.
The ADGM Companies Regulations do not appear to confine the use of a protected cell company in a fund-forming capacity to open-ended vehicles, and they treat protected cell companies, incorporated cell companies and open-ended investment companies as three distinct concepts. Fund form and cell form are specified independently. On that reading, a closed-ended protected cell company should be available to host a closed-ended credit fund, which would allow a manager in ADGM to build a multi-compartment credit platform as a single fund, under a single authorisation, with cells added on seven days’ notice.
It is worth being candid that this advantage is available on the face of the regulations rather than established by practice. The ADGM funds register does not presently disclose a closed-ended protected cell company used for a credit strategy, and the ADGM private credit funds we have identified are constituted as closed-ended investment companies rather than cell vehicles. Managers should treat the route as open but untested, and engage the Regulator early.
Layered on top is the permission that makes the credit strategy possible at all. In May 2023, following its Consultation Paper No. 8 of 2022, the FSRA enacted amendments enabling ADGM-based collective investment funds to invest in credit by originating and participating in credit facilities. A fund in ADGM can both segregate risk cellularly and originate the credit that generates it.
DIFC: Earlier to Both, Restricted to the Expensive Route
The DIFC was first to both instruments. Its protected cell regime for umbrella funds predates ADGM’s framework, and its credit fund regime came into force on 1 June 2022, a year ahead of ADGM’s.
The difficulty is structural. In the DIFC, the fund-forming protected cell company is an open-ended vehicle; the closed-ended PCC form is reserved for insurance business. A credit fund that must be closed-ended under CIR 13.12.2 therefore cannot be housed in the DIFC’s PCC umbrella at all. The most capital-efficient cellular route is closed to precisely the asset class that would benefit from it most.
The incorporated cell company remains available, and it works. Because each incorporated cell is a stand-alone company and a Domestic Fund in its own right, each can be constituted as a closed-ended investment company and registered or notified as a Qualified Investor Fund, satisfying CIR 13.12.2 cell by cell. Managers should note two limitations on the platform: an External Fund Manager is not permitted to use a Fund Platform, and a fund manager cannot use the ICC’s infrastructure to service funds that are not incorporated cells of that ICC.
Add the remaining specialist-class requirements, a threshold proportion of fund property devoted to providing credit, concentration limits, leverage restrictions, a finite term, and enhanced quarterly reporting and the same platform is a materially heavier build in the DIFC than in ADGM.
That position is under active review. On 7 July 2026 the DFSA published Consultation Paper No. 173, proposing the most significant overhaul of the DIFC collective investment fund framework since 2010, with a shift away from prescriptive, classification-based regulation towards a risk-based and disclosure-led approach for professional investor funds. Among the proposals are removal of the requirement that credit funds devote at least 90% of fund property to providing credit, deletion of several lending prohibitions, reduced base capital requirements for credit fund managers, and removal of dedicated credit fund fees. Whether the closed-ended requirement survives the review is the provision to watch, because it determines whether the PCC route opens.
Saudi Arabia: The Fund Form Neither Free Zone Offers
Here the picture inverts, and it deserves more attention than it has received.
Under the Instructions on the Financing Investment Funds, adopted by CMA Board Resolution No. 4-15-2026, private financing funds may be established as open-ended structures. The same framework consolidates direct and indirect financing strategies into a single regulatory document and, for the first time, permits financing fund units to be publicly offered and listed on the Main Market and the Nomu Parallel Market, with public funds subject to defined controls including borrowing limits calibrated against net asset value and a cap on exposure to any single beneficiary or group.
That is a material regional advantage. An open-ended credit vehicle can accept capital continuously, accommodate investors arriving at different points in the cycle, and grow its assets under management without the closing-date discipline that constrains a fixed-term fund. It is also precisely the format in which customised exposure is most valuable, because an investor selecting duration and credit quality is deciding how long to stay, not merely what to buy.
The scale of the opportunity is not modest. Saudi private investment fund assets reached SAR 663.6 billion in 2025, a 27% increase year on year, and public investment fund assets stood at SAR 220.8 billion at the end of the same year, also up 27%. More telling than the totals is their distribution: of those public fund assets, SAR 188 billion sat in 330 open-ended funds, against SAR 32.8 billion across just 26 closed-ended funds. Roughly 85% of the capital is in open-ended vehicles. In a market that plainly prefers to invest through perpetual structures, the ability to offer credit exposure in an open-ended form is not a technicality. It is the difference between competing for that capital and not.
What the Saudi framework does not yet provide is the cell. The Investment Funds Regulations and the Instructions for Simplified Investment Funds permit multiple unit classes and give managers wide latitude over unit class characteristics, governance and reporting in the fund’s terms and conditions, with baseline asset segregation obligations applying regardless of what the terms provide. But there is no statutory compartment — no mechanism by which a sub-pool within a single Saudi fund carries assets and liabilities ring-fenced against creditors of another sub-pool. Unit classes are available. Cells are not. And as set out above, unit classes cannot do this work.
In our experience advising private credit managers in the Kingdom, the constraint has been less a matter of what the regulations say than of how compartmentalisation is received during authorisation. That distinction matters, because it locates the question in supervisory interpretation and market precedent rather than in legislative amendment.
So, Who Is Leading?
On the evidence, nobody outright and that is the finding.
ADGM offers the most complete structure on paper: both cell forms, the cheaper of them apparently available for a closed-ended credit fund, express credit origination authority, and cell creation on notice for qualified investor funds. If a manager needs to build the vehicle this quarter, that is where it can be built with the caveat that the closed-ended PCC route has not yet been walked.
The DIFC has the architecture and the longer track record, but confines credit to the more expensive cellular route. Its consultation could change that within the year, and a manager weighing a DIFC platform should be reading CP 173 now rather than waiting for the outcome.
Saudi Arabia has neither cell form, and yet holds the one feature the others lack: an open-ended credit fund, in the market with by far the largest pool of investment fund assets in the region, a demonstrated investor preference for open-ended structures, and a public listing route to reach them. The Kingdom is missing a segregation mechanism. The free zones are missing a fund form. Of the two gaps, the Saudi one sits in the space between what the rules permit and how they are applied, which is the kind of gap that closes through engagement and precedent rather than legislation.
The Use Case Nobody Has Taken
Cellular vehicles are live in both ADGM and the DIFC and are being used for multi-strategy platforms, thematic mandates, and digital asset strategies. We have not identified a single Gulf-domiciled private credit fund using cells to tier credit risk.
The architecture exists. The credit fund permissions exist. Investor demand for duration and quality selection within a single relationship is well documented. The combination has simply not been assembled.
What Managers Should Do
Three points deserve attention before the first closing.
- Decide whether you need segregation or merely differentiation. If investors in your senior sleeve must be insulated from losses in your subordinated sleeve, unit classes will not achieve that, and no amount of drafting will make them.
- Choose the cell form on the basis of what your cells must do and where you are domiciling. In ADGM the PCC looks like the efficient answer, subject to confirming it with the Regulator; in the DIFC, CIR 13.12.2 has largely made the choice for you. A cell that originates loans and takes security in its own name needs legal personality in any event.
- Treat domicile as a live question rather than a settled one. Two of the three frameworks discussed here are under active reform, and the fund you design this quarter will be governed by rules that are still moving.
The managers who capture this market will be the ones who worked out early that exposure customisation is a question of corporate architecture, not of drafting the fee table.