Gulf Corporation Council-Focused Fundraising – December 2014

by Matthew Morris

  • 12 Dec 2014
  • PE

The Organisation of Petroleum Exporting Countries (OPEC), spearheaded by Saudi Arabia, decided last month not to cut their oil production. Oil prices have plummeted in recent months and with prices still falling, some economies, such as that of Russia, are suffering as a consequence. A number of OPEC members and oil producing states are based in the Gulf Cooperation Council (GCC trade bloc region, which lately has been the subject of increased attention. 

According to Preqin’s Funds in Market online service, there are currently 16 private equity vehicles raising capital that are looking to invest in the GCC region as part of a wider geographical focus, with an average target size of $419mn. These funds are hoping to collect $6.7bn in capital and range from venture capital funds to buyout funds, with real estate funds the most prevalent. The largest fund in market targeting the region is IDB Infrastructure Fund II, which is targeting $2bn in capital commitments. The fund targets investments in infrastructure projects in Islamic Development Bank member countries. The current figure for funds in market is up a significant amount from the same time last year, when five funds were targeting just above $1bn. Furthermore, the Fundraising Outlook feature on Preqin’s Funds in Market online service shows that there are more potential funds in a pre-marketing phase that will be targeting the region in 2015. 

This year has seen a notable increase in fundraising focusing on the region; it now stands at its highest level since 2011. Four funds have closed so far this year having raised over $1.1bn in capital commitments, with the largest vehicle to close being GC Equity Partners III, raising $750mn for investments in a range of industries in the GCC region and nearby countries. Also interesting to note is that of the four funds closed this year, two real estate vehicles have finalized that focus solely on property in Saudi Arabia. As the below chart shows, fundraising remains lower than the levels seen between 2006 and 2008, but with 16 vehicles in market comes renewed optimism for private equity focused on the region. 

Some states within the GCC region rely heavily on oil revenues, with their economic fortunes tied to the price of a barrel. Falling prices could cause some countries to struggle economically, but only time will tell if this discourages investors looking to commit capital to the region. However, there are at least some positive signs for the GCC states, with more funds in market and increasing levels of capital being raised for funds focused on the region. 

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