The Capital Market Authority (CMA) Board in Saudi Arabia has approved a series of enhancements designed to develop the regulatory environment for investment funds in the country. This includes amendments to the Investment Funds Regulations, the Real Estate Investment Funds Regulations, and the Glossary of Defined Terms Used in the Regulations and Rules of the Capital Market Authority, as reported by the Saudi Press Agency (SPA).
The changes approved by the CMA Board aim to create a robust regulatory framework for investment funds, enhance the asset management industry, and bolster its competitiveness by pinpointing areas for improvement and adopting global best practices. These amendments also introduce additional regulatory provisions that support the growth of both the investment fund and real estate investment fund sectors, enhance transparency and disclosure for fund unit holders, and establish governance standards that ensure greater protection of investors’ rights.
Expansion of fund distribution categories
Key amendments focus on improving the efficiency of investment fund management by expanding the categories authorized to distribute fund units. This now includes investment fund distribution platforms and electronic money institutions licensed by the Saudi Central Bank, enabling distribution through their websites or mobile applications. The amendments also address the termination of investment funds and the dismissal of fund managers, in addition to regulating the voluntary withdrawal of managers from public and private investment funds. Among these provisions is the requirement to obtain CMA approval and the obligation of the current fund manager to transfer fund management responsibilities to the successor within 60 days of receiving such approval.
Read more: Saudi CMA’s locally managed assets surge to $232.2 billion in 2023
Protecting investor rights in funds
These measures are aimed at protecting the rights of investors in both public and private funds, ensuring a smooth transition of fund management responsibilities, safeguarding the interests of unit holders, and enhancing investor confidence in the capital market.
As part of efforts to expand investment opportunities for Real Estate Investment Traded Funds (REITs) listed on the Parallel Market (Nomu), and to support the diversification of their assets while increasing flexibility to enhance potential returns for investors, the approved amendments permit these funds, at the time of their establishment, to invest in real estate development projects without being bound by the investment ratios and asset restrictions outlined in the Real Estate Investment Funds Regulations.
Surge in managed assets value
In April 2024, Saudi Arabia’s asset management industry experienced significant growth, with managed assets increasing by 74 percent. In 2019, the total value was SAR500 billion ($133.29 billion), rising to 871 billion riyals ($232.2 billion) by the end of 2023.
The Saudi Capital Market Authority (CMA) reported that the industry achieved unprecedented milestones, generating SAR4.2 billion ($1.1 billion) in revenue by the end of 2023. This marks a growth rate of 58.6 percent compared to SAR2.7 billion in 2019.
Additionally, the number of investment funds hit a record high of 1,285 in 2023, up from 607 in 2019, reflecting a growth rate of 111.7 percent. The number of subscribers to investment funds also saw notable growth, exceeding 1.17 million by the end of 2023, compared to 334.2 thousand in 2019—a remarkable increase of 251 percent, setting a new historical record.
