The Growing Influence of Middle East-Based Investors in Private Equity – September 2015

by Olivia Perry

  • 09 Sep 2015
  • PE

The Middle East is a region with a wealth of natural resources and a relatively young and growing population, and has shown signs of further liberal development in recent times. Consequently, it has become a player of growing importance in the private equity space. At present, Preqin’s Investor Intelligence online service tracks 139 LPs based in the Middle East that invest or are considering investing in private equity. Although Middle East-based LPs make up only 2% of the private equity investor universe, they still represent an important source of capital for fund managers; investors based in the region have an aggregate $3.9tn in assets under management (AUM). However, only 16% of these Middle East-based LPs are looking to make new commitments to private equity funds over the next 12 months.

Banks are the most prevalent Middle East-based institutional investor, representing 27% percent of LPs in the region, while investment companies (23%) and single- and multi-family offices (12%) are also prominent players in the region. Notably, based on AUM, of the top 10 private equity investors based in the Middle East, six are sovereign wealth funds. This investor type represents just under half (46%) of aggregate AUM in the region, accounting for $1.9tn, followed by banks with $1.4tn.

In terms of fund type, over half (52%) of investors based in the region are looking to invest in buyout funds, closely followed by venture capital (48%) and growth vehicles (40%). The primary location preference for Middle East-based capital is the Middle East itself, with 56% of LPs looking to invest close to home, while 42% are seeking investments in Europe and 38% looking for opportunities in Asia. This domestic preference could be the factor driving the interest among investors in venture capital and growth strategies, with such fund types seeking to take advantage of the emerging economies and nascent middle classes within the region.

With such large pools of capital on the balance sheets of sovereign wealth funds and banks in the Middle East, the region is likely to remain a vital source of capital for private equity fund managers, especially for those based in the region.

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