February 9, 2021

Saudi Wealth Fund Joins Qatar, UAE Peers in Private Lending Rush

By Nicolas Parasie

February 9, 2021, 11:31 AM

  • Fund aimed at mid-size Mideast firms looking to get financing
  • Private credit globally has ballooned into $850 billion market

Saudi Arabia’s $400 billion Public Investment Fund became the latest sovereign investor to enter the growing market for direct lending.

The PIF, as it’s known, will anchor a $300 million Shariah-compliant fund started by Dubai-based private equity firm NBK Capital Partners, according to a statement on Tuesday. Yaser Moustafa, senior managing director at NBK Capital, said in an interview that the vehicle will also involve a “very prominent” U.S. family office and large institutional investors.

Private credit has emerged as a popular asset class in recent years, ballooning into an $850 billion market as it attracted interest from the world’s largest sovereign investors. NBK Capital, the private equity arm of Kuwait’s largest bank, said it completed the first closing of the credit fund, which will work with mid-sized Middle Eastern firms that are struggling to secure attractive financing.

“Because of some of the constraints on some of the regional banks and some of traditional funding sources, there’s a gap there for private credit to fit in,” Moustafa said. “That’s the gap we can fit.”

Preceding the PIF in the Gulf region, Abu Dhabi wealth fund Mubadala Investment Co. last year announced a $3.5 billion direct lending partnership with Barings LLC and also teamed up with Apollo Global Management Inc. for a $12 billion venture. Credit Suisse Group AG set up a multi-billion platform with Qatar Investment Authority.

Global SWF, a research firm and data provider, estimates that private credit as an asset class has risen from 2% of the portfolio of the world’s top 10 state-owned investors in 2015 to 3.2% in 2020.

‘Crucial Source’

“With traditional banks restricting lending, private credit will serve as a crucial source of financing in the economic recovery, particularly for mid-market companies,” Global SWF said in a report.

The $300 million fund will be led by Sikander Ahmed, managing director and head of private credit at NBK Capital, and focus mostly on private sector companies in Saudi Arabia, the United Arab Emirates and select adjacent markets.

It aims to make 10 to 12 investments of $15 million to $50 million throughout its eight-year life with the goal to “generate attractive cash yield and total returns,” according to a statement.

In contrast to similar such efforts in the Middle East, the partnership with the PIF will focus on driving money into the region. With Gulf sovereign investors turning their focus to domestic economies, Moustafa said the fund can offer a mechanism for channeling money where it’s needed.

It has the size and scale to be “a funnel for international capital coming into the region,” he said.

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