Private Equity Funds Targeting the Middle East and Israel – March 2015

by Victoria Pitman

  • 17 Mar 2015
  • PE

Preqin’s Funds in Market online service shows that there are 41 private equity vehicles currently in market that specifically focus on the Middle East and Israel. Collectively targeting $9.3bn, the majority of these vehicles are being raised by fund managers based in the region, though GPs from the US, UK and Russia also feature. Fundraising in the Middle East and Israel dropped dramatically after 2008, a result of the declining appetite for private equity following the economic crisis. Ongoing troubles in the region, from plummeting oil prices to outbreaks of conflict, mean that it may be difficult for private equity fundraising to reach the highs of 2007 and 2008.

Fifteen of the vehicles currently in market are being raised by managers based in Israel, the highest amount for any individual country in the region. Thirteen of these vehicles are country-specific funds that intend to focus only on investment opportunities domestically, while the remaining two funds target global and US-based opportunities alongside investments in Israel-based firms. While political tension does not always spill over into investment practices, the long history of difficult relations between Israel and its Middle Eastern neighbours means this lack of investment in other countries in the region is unsurprising. The sentiment is echoed from the other side of the fence: none of the 16 vehicles being raised by fund managers based in countries in the Middle East have expressed a specific preference for opportunities in Israel.

Venture capital vehicles are the most prevalent fund type among funds currently on the road, with 21 of the 41 vehicles falling into this category. Collectively, these funds are targeting $1.4bn, with the largest vehicle being Jerusalem Venture Partners VII. The fund is targeting $180mn to focus on early stage opportunities in technology-related industries in Israel.

By fund type, infrastructure funds in market focused on the Middle East and Israel are targeting the highest amount of capital, an aggregate $5.1bn. The largest of these vehicles is IDB Infrastructure Fund II, which is managed by ASMA Capital Partners, based in Bahrain. This fund is targeting $2bn and will make infrastructure investments in the Middle East, as well as in other emerging markets.

While geopolitical concerns may have had an impact on investor appetite for opportunities in the Middle East and Israel, the region does hold attractive opportunities. While the sharp drop in oil prices is concerning, Middle Eastern economies have been pushing for greater diversification in order to not be so reliant on oil revenues for prosperity, and infrastructure remains a key area of interest. For Israel, a thriving technology sector has resulted in a high proportion of venture capital vehicles targeting the region, with 13 of the 21 venture capital vehicles focusing on Israeli opportunities.

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