97% Of Middle East Institutional Investors View Saudi Arabia As Premier Market For Private Debt Funds

The "Territory Guide: The Rise of Private Debt Funds in Saudi Arabia" report, released by Preqin in collaboration with the Saudi Venture Capital Company (SVC), provides valuable insights into the region's financial landscape. The report indicates that 97% of institutional investors based in the Middle East consider Saudi Arabia as the most promising market for private debt funds in the coming year. This marks a significant rise from 82% in 2023.

The report highlights that private debt funds are gaining traction as an attractive asset class within Saudi Arabia. This growth is linked to increasing interest from local, regional, and global investors, coupled with the positive effects of Vision 2030 reforms. Since Vision 2030's launch in 2016 through to the third quarter of 2024, over a quarter (27.5%) of Middle East-focused private debt fund deals have been based in Saudi Arabia.

Saudi Arabia's private capital market is maturing, and this trend is expected to continue. The Kingdom's first-of-its-kind report on private debt funds underscores their growing appeal. Mezzanine funds account for half of the total exposure to Saudi Arabia among private debt funds closed between 2016 and Q3 of 2024. Direct lending and venture debt funds follow at 30% and 20%, respectively.

Dr. Nabeel Koshak, CEO and board member of SVC, commented on the report's significance: "This report highlights the emergence of private debt funds as a key asset class in Saudi Arabia, driven by the Kingdom's Vision 2030 and its ambition to diversify the economy." He emphasized SVC's commitment to supporting reports that provide essential data for strategic decision-making.

David Dawkins, lead author of the Preqin report, noted the increasing global interest in Saudi Arabia's private debt sector. He stated, "For other developing economies in the Middle East and beyond, Saudi Arabia's success in this area will strengthen the impetus for improving transparency to secure the capital needed for sustainable growth in a net zero world."

SVC’s Role and Objectives

Established in 2018 as a subsidiary of SME Bank under the National Development Fund (NDF), SVC aims to boost financing for startups and SMEs from pre-Seed to pre-IPO stages. It achieves this through investments in funds and direct investments in startups and SMEs.

The findings from this comprehensive report underscore Saudi Arabia's potential as a hub for private debt investment. As Vision 2030 continues to shape economic diversification efforts, these insights are crucial for policymakers, investors, and business founders aiming to foster a robust private capital ecosystem.

With inputs from SPA