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Breakdown of Private Equity Investors Based in the Middle East and North Africa - August 2014

by Karun Ahluwalia

  • 19 Aug 2014
  • PE

The Middle East and North Africa (MENA) region has not been seen as a traditional base for private equity activity, as is indicated by Preqin’s data which shows that 2% (127) of all investors in private equity are based within the MENA region. However, despite only representing a small proportion of the LP universe in terms of numbers, investors based in this region contribute a significant amount of capital to the asset class and represent almost 5% of the overall total assets figure of all investors in private equity. Preqin’s Investor Intelligence online service currently tracks 5,352 active investors in the asset class with aggregate assets under management of $109tn, over $3tn of which is represented by MENA-based LPs.

In terms of institutional investor types in the MENA region, investment companies are the most prevalent investor type representing 27% of all LPs based in the region, while banks (19%) and sovereign wealth funds (10%) are also prominent players. Notably, the region’s two largest private equity investors are both sovereign wealth funds: the Kuwait Investment Authority and Abu Dhabi Investment Authority have current allocations to private equity of $30bn and $15.4bn respectively. The remaining investor types include family offices, corporate investors, asset managers, endowment plans and pension funds.

With regards to geographic preferences, 60% of all LPs in the MENA region actively investing in private equity have a preference for vehicles focusing on opportunities in regions outside of North America, Europe and Asia, most notably the MENA region and GCC countries. MENA-based LPs also have an appetite for investment opportunities in Europe, with just less than half (47%) demonstrating a preference for funds focusing on the region. There is some enthusiasm for investment opportunities in Asia and North America, with 40% and 41% of LPs respectively expressing an interest for such vehicles. A smaller proportion of investors (38%) seek opportunities globally, and 34% seek exposure to emerging markets within the asset class.

As well as investing in a range of geographic regions, MENA-based investors also have exposure to a variety of different private equity fund types. Fifty-five percent of investors in this region have demonstrated an appetite for buyout vehicles, with 46% showing a preference for growth funds. Venture capital vehicles are the third most sought-after fund type by these investors, with 39% holding a penchant for them. Other types of funds which have proven to be favourable among MENA-based investors include secondaries, distressed debt, funds of funds, special situations, natural resources and mezzanine vehicles.

Overall, MENA investors have an aggregate target allocation to the asset class of over $56bn, with an aggregate current allocation of more than $66bn. Based on all the investors in the region that Preqin track, 23% of these LPs will be actively looking to make new fund commitments in the next 12 months.

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