Middle East assets under management set to grow after 52% gain

Assets under management in the Middle East, which have grown 52% over the past three years, are expected to increase further as oil and gas prices continue to rise.

Rising oil prices, up more than 60% in the past year and topping $100 a barrel, along with soaring natural gas prices are helping improve the fortunes of private capital in the Middle East , said Preqin, a specialist in data and analysis of the alternative assets industry. said in a report Thursday.

Natural gas prices in the United States hit a 14-year high this month and they surged in Europe following the Russian-Ukrainian war, now in its third month.

Preqin said: “The ongoing conflict in Ukraine, alongside the continued post-pandemic economic recovery, is driving up commodity prices, creating near-term opportunities.

“But in the long term, European governments are seeking to reduce their reliance on imported hydrocarbons. Efforts to increase energy independence and move away from imported hydrocarbons have major implications for the Middle East.”

After contracting in 2015-2016 following the fall in oil prices that began in 2014, assets under management in the Middle East have rebounded since the end of 2019, increasing by 52% to reach 35 billion. dollars, with Saudi Arabia and the United Arab Emirates recording improvements.

The UAE accounts for around 57% of the region’s AUM in the third quarter of 2021, Preqin said. Saudi Arabia accounts for around 24%, while Bahrain holds around 13% of the region’s AUM market.

Venture capital deals in the region’s software, internet and financial services sectors have grown alongside efforts by local governments to boost high-skilled jobs and make their economies more service-oriented.

Preqin cited Merak Capital’s $40 million investment in Saudi software technology firm Master Works, the biggest software deal in the first quarter of this year, as an example of local investment supporting the growth of technology groups.

Riyadh-based Merak has raised capital from Jada, a private equity fund of funds founded by the kingdom’s Public Investment Fund, as well as Saudi Venture Capital Company, the government.

“This agreement, and many others, signals the strength of regional governments’ commitments to economic diversification, as well as the future role of private capital models in this achievement,” Preqin said.

Venture capital fundraising has accounted for, on average, about 41% of capital raised each year and 46% of total capital ($3.7 billion) since 2017, he said.

As private capital markets have evolved over the past few years, the composition of asset classes in the Middle East has also changed and the inflow of international capital has increased in transactions.

“Not only has the composition of asset classes changed, with fundraising moving away from real estate towards more venture capital, but international capital is increasingly flowing into transactions in the region” , said Alex Murray, vice president of research at Preqin.

Three Saudi Aramco and Adnoc gas and oil contracts in Saudi Arabia and the United Arab Emirates have attracted capital from BlackRock, Silk Road Fund, China Merchants Capital, Samsung Asset Management, GIC, Brookfield and Global Infrastructure Partners. The three deals from June 2020, April 2021 and December 2021 had a total value of $38 billion, according to Preqin.

“This marks a shift from the traditional role of the Middle East as a source of capital for deployment outside the region. As economic growth generates investment opportunities, more and more global managers are looking to the region for deployment opportunities,” Murray said.

Updated: May 20, 2022, 9:25 a.m.