Middle Eastern wealth funds have historically ranked as the biggest backers of private equity and many have increasingly been pushing into private credit. Over the past few weeks, there’s been some anxiety in both those pockets of finance.
First, Blue Owl shut the gates on one of its funds, preventing investors from withdrawing cash, and said it would sell assets to return investor capital. And on Monday, a report from Bain laid out some stark numbers on the state of private equity — distributions as a percentage of net asset value are at the second-lowest level since the depths of the 2008 financial crisis.
The Bain report was published at a delicate moment for buyout firms in the region. Many of the largest Gulf wealth funds have already become pickier about who they work with. Some have sounded alarm over valuation practices and returns, while others have complained that pockets of the market have become crowded.
Yet, the industry remains front and center in the Middle East. For instance, Qatar’s sovereign wealth fund is teaming up with Orix to start a $2.5 billion private equity fund targeting Japanese companies, Bloomberg News reported in November. And Kuwait’s pension fund is looking to restart private equity allocations after a years-long hiatus.
Meanwhile, many regional behemoths have made deeper inroads into private credit. Earlier today, my colleague Olivia Fishlow reported that the $580 billion Qatar Investment Authority is investing in a private credit firm run by former Goldman Sachs partners.
Over in Abu Dhabi, Mubadala has been a prolific backer of private credit, which has been among the fund’s top-performing asset classes. It has built up a $20 billion portfolio, supported by relationships with the likes of Apollo Global Management, Carlyle and KKR. In 2023, it formed a partnership with Blue Owl, committing $1 billion to the firm’s credit platform.
To be sure, those private credit and buyout outlays are a sliver of the nearly $5 trillion of assets overseen by Middle Eastern wealth funds.
Shortly after a pair of collapses exposed losses for banks and investment firms, and spooked investors late last year, a top executive at Mubadala batted away concerns over structural issues within the sector.
“We’ve had four fantastic years in private credit, and we know that’s likely to perform cyclically,” Waleed Al Mokarrab Al Muhairi, Mubadala’s deputy group chief executive officer, said at the time. “I don’t think it’s going to implode in any shape, way or form.”
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