Economies in the Middle East are at a crossroads. The decline in oil prices and the COVID-19 outbreak increased the need for structural economic reform. Initiatives are underway to boost domestic employment, and the Middle East’s growing private capital industry can play a valuable role.
Private capital AUM in the region has been stable for the past decade – as of March 2020, AUM stands at $24 billion, slightly lower than the $29 billion recorded as of December 2011.
However, the fall is down to a decrease in the amount of dry powder from $8.3 billion to $6 billion, showing that fund managers are finding attractive opportunities to deploy capital. GP estimates of investor appetite are optimistic, and large funds keep coming into the market – the 10 largest funds currently in market are seeking a combined $5.6 billion.
Activity is sustained on a large number of investors in the region, only the largest 10 investors in the region have a combined AUM of $3.71 trillion, and overall the Middle East is poised for capital growth.
Dave Lowery, Head of Research Insights at Preqin said “Private capital will play an important role as the Middle East’s economies restructure and reduce their reliance on fossil fuels. The region can rely on the large number of investors and fund managers it has, who are already creating a vibrant and active investment market, for private capital growth.
“In many sectors, dealmakers are applying expertise learned in other markets to create regional champions, and global fund managers are seeing emerging opportunities in the region. However, it will be crucial to the future success of the market to demonstrate a track record of strong returns if it is to see significant interest from overseas participants.”
Below are some facts on key private capital in the Middle East:
• As of March 2020, Middle East-based private capital assets under management stand at $23.9 billion, slightly lower than the $24 billion recorded as at December 2011.
• This is primarily due to decreases in dry powder, which has fallen from $8.3 billion to $6 billion in the period. This indicates that fund managers are putting capital to work in investment opportunities.
• Recent quarters have seen a spate of dealmaking. 2019 saw record regional aggregate deal values across the buyout, real estate and infrastructure sectors.
• The 10 largest funds focusing on the region are targeting a collective $5.6 billion – Rakiza Infrastructure Fund is the largest fund in the region, seeking $1 billion.
• The 10 largest Middle East-based investors have $3.71 trillion in assets under management.
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