In recent years, Saudi Arabia’s financial headlines have been dominated by oversubscribed IPOs and marquee, state-backed projects. Yet a quieter transformation is underway—the rapid expansion of private-capital vehicles. While part of a wider global trend, this shift is especially pronounced in the Kingdom. These funds, operating outside public markets, are emerging as key enablers of the next phase of national economic development.
Private capital with a domestic focus
Unlike the IPO boom—which largely directs capital into mature or state-affiliated assets—private funds now target under-capitalized sectors of the real economy: SMEs, healthcare, logistics, education and non-bank financing platforms. These areas often require patient capital and close institutional engagement—precisely what private funds are designed to provide.
Strategies span mainly venture capital, private equity and private credit. Venture funds frequently employ staged capital calls, releasing cash once portfolio companies hit milestones such as revenue thresholds or user-acquisition targets. Private-credit vehicles help fill the liquidity gap left by banks focused on giga-projects, while private-equity funds often drive consolidation in fragmented sectors through hybrid structures that blend equity control with flexible financing terms.
Across these models, managers are uncovering attractive risk-return profiles—particularly where local insight and structural agility let them seize opportunities overlooked by more rigid capital. These CMA-regulated funds remain largely domestic in focus, which in turn attracts government-linked investors with policy mandates, such as the Saudi Venture Capital Company (SVC) and the Saudi Industrial Development Fund (SIDF). For international exposure, however, Saudi LPs are expected to continue allocating through offshore vehicles or global asset managers.
A new institutional infrastructure
Targeted reforms have underpinned this growth. The Capital Market Authority (CMA) has streamlined fund-launch procedures, balancing investor protection with accessibility. By 2024, total assets under management (AUM) in Saudi capital markets surpassed SAR1 trillion ($266.6 billion), a 20.9 percent year-on-year increase. Subscribers to public and private funds rose 47 percent to more than 1.72 million.
The broader ecosystem is maturing as well. Fund administrators, auditors, legal advisers and Shariah boards now offer increasingly specialized services. Meanwhile, fund-management companies—akin to European ManCos—have set up local operations, aiming to run multi-strategy platforms under a single licence.
Retail capital is entering the fold, too. CMA-regulated investment platforms allow qualified retail investors to access private funds at lower minimums, broadening participation—particularly in real-estate-backed vehicles that remain popular with individuals.
Structuring a fund in Saudi Arabia
Launching a private fund follows a clear, though more controlled, process than in some other jurisdictions. A locally licensed manager submits the vehicle to the CMA for approval—a step that typically takes a couple of months. Once cleared, the fund is established via a special-purpose entity (SPE) and governed by its offering terms, which stand in lieu of a limited-partnership agreement. Most private funds are closed-ended vehicles with fixed terms and defined exit strategies.
Separate management or investment agreements are less common; governance obligations are embedded in the offering documents and enforced through CMA oversight. While international templates such as the ILPA standards may eventually be localized, the current model provides sufficient clarity and enforceability for institutional investors.
Despite their “private” designation, these funds can be offered to retail investors under defined conditions—for example, an individual cap of SAR200,000. Sponsors may issue multiple share classes to tailor return profiles or governance rights. While no statutory minimum applies to most funds, direct-financing vehicles must launch with at least SAR50 million in committed capital.
The international link
Saudi private capital is increasingly woven into global investment flows. Cross-border syndicates, co-investment platforms and GP partnerships between Riyadh-based managers and international firms are gaining momentum. Leading managers already secure commitments—from PIF, regional banks and other quasi-sovereign investors—to deploy capital through Saudi-domiciled structures.
Foreign investors can participate via a foreign-investment account, which—unlike a MISA licence—does not require a local commercial presence. This route suits single-asset or project-specific funds, preferred for their simplicity and tax efficiency.
Several international managers now appoint Saudi-based co-GPs, enabling deployment through locally regulated platforms. Riyadh’s private-capital market increasingly resembles those of developed jurisdictions; although still policy-led and closely supervised, early movers benefit from direct access to local opportunities and deepening institutional trust.
Looking ahead
Private funds are poised to play a counter-cyclical role alongside Saudi Arabia’s public markets. By targeting underserved sectors, smoothing volatility and fostering long-term governance discipline, they signal a broader evolution in risk appetite—from speculative to strategic, from extractive to developmental.
As Professor Florin Vasvari, academic director of the Institute of Entrepreneurship and Private Capital at London Business School, observes: “Saudi Arabia’s surge in private-capital vehicles marks the buildup of a full domestic ecosystem able to channel patient, value-adding capital into the Kingdom’s real economy. By pivoting beyond high-profile IPOs to venture, private-equity and private-credit funds, the country is broadening both the sources and uses of capital—fueling scale-ups in manufacturing, healthcare, logistics, education and technology among other sectors, while still offering investors governance and transparency standards that rival mature markets.”
Saudi Arabia’s capital story is far from over—but it is clearly evolving, from oil and IPOs to a more flexible, private and domestically anchored foundation for growth.
Dimitrios Vourakis is a co-founder of Emrgo, an investment firm with headquarters in Riyadh.
