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MENA-Based Private Equity Investor Activity in the Face of Instability – July 2015

by Joseph Borda

  • 02 Jul 2015
  • PE

The current standing of the MENA (Middle East and North Africa) region comprises an extremely diverse picture. Countries such as Syria, Iraq, Libya and Yemen are in the midst of violent conflicts that have heavily impacted socio-economic landscapes both nationally and regionally. Political transitions in isolated states and the fall of oil prices have slowed economic growth and brought instability, but the region overall has also seen an enormous rise in wealth over recent years, leading to an increase in activity in the private equity asset class.

According to Preqin’s Investor Intelligence online service, there are currently 162 institutional investors based in MENA that are currently investing, or have previously invested, in private equity funds. These LPs have a significant collective pool of capital, with an aggregate $4.1tn in assets under management (AUM). These figures are a substantial increase on the corresponding statistics five years ago: in 2010, Preqin tracked 113 LPs based in MENA, with an aggregate $1.4tn in AUM. Within the region, the United Arab Emirates has the greatest number of LPs investing in the asset class, accounting for 24% of MENA’s total number, followed by Saudi Arabia (18%), Lebanon (13%), Kuwait (11%) and Morocco (9%).

Looking at the geographical investment preferences of this community, Preqin data shows that a 53% majority of MENA-based LPs seek investment opportunities within their domestic region. The next most common area of interest is Europe, with 37% of MENA-based investors indicating a preference for private equity opportunities in the region. Similar proportions have expressed interest in North America (32%) and Asia (33%), showing the wide range of geographies considered by those investors based in MENA

Regarding fund type preferences, the chart below illustrates the extent to which venture capital, buyout and growth vehicles are the most sought-after fund types by MENA-based LPs.

These will continue to be desired fund types over the coming year, as 72% of LPs planning to make private equity investments in the next 12 months are targeting at least one of these strategies. Saudi Arabia-based Samba Financial Group is looking to commit to a range of fund types in the next 12 months, including buyout, distressed debt, growth and secondaries vehicles. It manages a global portfolio and continues to seek investments focused on North America, Europe and emerging markets. Another LP, Industrial Bank of Kuwait, is looking to commit between $40mn and $50mn across six to nine funds. It is targeting mezzanine, buyout, venture capital and distressed debt vehicles across a diverse geographical landscape, including North America, Europe, Asia and the Middle East.

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