Private debt in Saudi Arabia is at an inflection point — Preqin reports

Growing interest from regional and global sources of capital is driving momentum as the Kingdom’s private capital market evolves

/EIN News/ -- LONDON, Nov. 24, 2024 (GLOBE NEWSWIRE) -- Preqin, the global leader in alternative assets data, tools, and insights, today published its Territory Guide: The Rise of Private Debt Funds in Saudi Arabia 2024 report in partnership with SVC.

The report shows that private debt is becoming an increasingly attractive asset class in Saudi Arabia and is expected to grow, as the Kingdom’s private capital market continues to mature. This trend is driven by a growing interest from regional investors and global sources of capital, and the positive impact of the Vision 2030 reforms.

Regional investors increasingly bullish on private debt, notably on opportunities in Saudi Arabia

In recent years, regional and global investors have increasingly shifted their attention to Saudi Arabia. 97% of Middle East-based, surveyed institutional investors* cited the Kingdom as the market in the region offering the best opportunities in the next 12 months, up from 82% in 2023, Preqin survey data shows. 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.

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 (27.5%) of Middle East-focused private debt deals were based in Saudi Arabia.

David Dawkins, lead author of the report, at Preqin, says, “Global investment firms are not alone in closely watching the growth and evolution of Saudi Arabia’s nascent 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.”

Athary Fahad Almubarak, Chief Strategy Officer, SVC, added, “By analyzing insights from market players in this report, we highlight our commitment to enhancing transparency in Saudi Arabia's private capital markets. This report examines the key trends driving the growth of the expanding private debt asset class, showcasing its increasing potential in supporting the growth of small and medium-sized enterprises (SMEs) and driving economic diversification.”

Additional key findings include:

• Funds in market: There are eight funds in market investing in Saudi Arabia, targeting more than $1.7bn. The total amount raised at final close by private debt funds investing in Saudi Arabia hit a record high of $335mn in 2022, when two funds announced their final close. That is a significant milestone given $32mn was raised in total, by one fund, in 2003.
  
• Private debt funds with Saudi Arabia exposure: Of the total private debt funds with Saudi Arabia exposure that closed between 2016 and September 2024 by fund type, mezzanine funds represent half of the total Saudi Arabia exposure, followed by direct lending and venture debt funds at 30% and 20%, respectively.
  
• SMEs growth: Support for start-ups and small to medium sized enterprises (SMEs) in Saudi Arabia is reflected in high percentage of venture debt that reached 75% of the total number of funds in market with Saudi Arabia exposure.
  

Notes to the editors

* Figures taken from the Preqin Middle East Investor Survey, February 2024.

If you would like more information or would like to speak with the report author, please contact Mimi Celeste Taylor at mimiceleste.taylor@preqin.com

About Preqin

Preqin, the Home of Alternatives™, empowers financial professionals who invest in or allocate to alternatives with essential data and insight to make confident decisions. It supports them throughout the entire investment lifecycle with critical information and leading analytics solutions. The company has pioneered rigorous methods of collecting private data for over 20 years, enabling more than 200,000 professionals globally to streamline how they raise capital, source deals and investments, understand performance, and stay informed. For more information visit www.preqin.com.

About SVC

SVC is an investment company established in 2018. It is a subsidiary of the SME Bank, part of the National Development Fund. SVC aims to stimulate and sustain financing for startups and SMEs from pre-Seed to pre-IPO through investment in funds and direct investment in startups and SMEs. Further information is available at www.svc.com.sa.