Saudi Arabia Key Market for Private Debt Funds

Saudi Arabia has emerged as the most promising market for private debt funds in the upcoming year with 97% of the Middle East-based institutional investors evincing interest, marking a notable increase from 82% in 2023, according to Preqin, a global leader in alternative assets data, tools, and insights.

In its latest report entitled “Territory Guide: The Rise of Private Debt Funds in Saudi Arabia,” published in partnership with Saudi Venture Capital Company (SVC), Preqin said that the private debt funds were increasingly becoming an attractive asset class in Saudi Arabia, and are expected to grow as the Kingdom’s private capital market continues to mature.

This trend is attributed to a rising interest from local and regional investors and global sources of capital, alongside the positive impact of the Vision 2030 reforms, the report said.

“Since Vision 2030 was launched in 2016 and up to 2024-Q3, more than a quarter (27.5%) of Middle East-focused private debt fund deals were based in Saudi Arabia,” the report said.

The report also revealed that of the total private debt funds with Saudi Arabia exposure that closed between 2016 and Q3 of 2024, mezzanine funds represent half of the total Saudi Arabia exposure, followed by direct lending and venture debt funds, at 30% and 20%, respectively.

Adding to this, for the second year in a row, private debt recorded the highest percentage of Middle East surveyed investors who plan to commit more capital to the asset class over the next 12 months. Over half (58%) of survey respondents said the same, up from 50% in 2023.

In terms of asset class performance, 86% of surveyed investors said that their private debt portfolios met or exceeded expectations, up from 77% in 2023.

The enhanced investor confidence is underpinned by the work of government-led Vision 2030’s framework of economic reforms that aims to accelerate investment and transform the Kingdom’s oil-reliant economy.

The improving regulatory environment has had a positive impact. Since Vision 2030 was launched in 2016, more than a quarter (28%) of Middle East-focused private debt deals were based in Saudi Arabia, Preqin said.

Key Asset Class        

SVC CEO and board member Dr Nabeel Koshak said that the report highlighted 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.

“At SVC, we continue our commitment to support the development of such reports that provide policymakers, investors, and founders with insights and data to inform strategic decisions and policies to nurture the private capital ecosystem further,” Dr Koshak said.

Lead author of the Preqin report David Dawkins also highlighted the growing global interest in Saudi Arabia’s private debt industry.

“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,” he said.

SVC is an investment company established in 2018, a subsidiary of the SME Bank, part of the National Development Fund (NDF). It aims to stimulate and sustain financing for start-ups and SMEs from pre-Seed to pre-IPO through investment in funds and direct investment in start-ups and SMEs.