Key Points
- Sovereign-related investors,
more commonly referred to as sovereign wealth funds, have increasingly made the
Middle East a global center of wealth and investment. -
Gulf SWFs, no longer just
passive investors, are taking an active role in big-ticket, controlling-stake
M&A transactions outside the region. -
Meanwhile, the region has become more and more open to inbound investment, and to revising rules to
attract talent and diversify toward a more
sustainable, long-term framework for growth.
Driven to a large extent by the region’s enormous sovereign wealth funds (SWFs), the
Middle East has become a new global hub of wealth and investment. This is
especially the case in the six member states of the Gulf Cooperation Council
(GCC) — The United Arab Emirates (UAE), Saudi Arabia, Qatar, Kuwait, Bahrain
and Oman — and the region’s six largest SWFs by assets under management (AUM),
listed below in alphabetical order:
-
Abu Dhabi Developmental
Holding Company (ADQ). -
Abu Dhabi Investment
Authority (ADIA). - Kuwait Investment Authority (KIA).
-
Mubadala Investment Company
(Abu Dhabi). -
Public Investment Fund (PIF)
(Saudi Arabia). -
Qatar Investment Authority
(QIA).
A Major Economic Hub
A glance at recent trends presents a clear picture. By the third quarter of 2024,
M&A aggregate deal value in the Middle East increased by 25.3% compared to
the same period in 2023, primarily in the UAE and Saudi Arabia. Moreover, in
the first half of 2024, over 54% of funds deployed by SWFs globally were from major Middle East SWFs, the highest level since 2009. This is from a pool of
$4 trillion, currently managed by just the six SWFs listed above, three of
which are based in Abu Dhabi. As of October 2024, at $1.7 trillion, Abu Dhabi was the world’s richest city in terms of assets managed by SWFs.
The UAE, and Abu Dhabi in particular, is increasingly becoming a focal point
internationally, building on an already established position as a regional
hub. Factors for its rise in prominence include:
-
A 226% increase in AUM in
the last year as more financial firms and asset managers such as hedge funds,
private equity firms, institutional funds and venture capital firms open
offices in Abu Dhabi (including, most recently, PGIM, General Atlantic,
BlackRock and Nuveen). -
With a streamlined approval
process in the Abu Dhabi Global Market (ADGM) — the UAE capital’s financial
hub — 1,271 new licenses were issued in the first half of 2024. -
Regional equity markets have
thrived, with the Dubai and Abu Dhabi stock exchanges surging to over $1 trillion in market capitalization by November 2024, surpassing Milan and
Madrid. That gain has been driven in large part by the activities of companies
linked to the Abu Dhabi conglomerate International Holding Co. as well as big-ticket IPOs such as Lulu Hypermarket’s $1.72 billion listing on the Abu Dhabi
stock exchange in November 2024 and regional food delivery business Talabat’s
$2 billion listing in Dubai in December 2024.
Saudi Arabia is also expanding its position as a hub for business, with a
number of leading international companies choosing to base their regional
headquarters there. Its stock exchange continues to perform well, with deal
volumes of IPOs, takeovers and capital raisings jumping by 85% through late
2024 and market capitalization reaching nearly $3 trillion, according to the
financial services firm ION Analytics.
Trends in Outbound Investments
The substantial capital that SWFs in the GCC possess is forecast to double to $8 trillion by 2030. SWFs regularly feature in big-ticket, cross-border
M&A transactions, and they are often sought after as co-investment
partners and limited partner investors.
Recent major transactions abroad include:
Mubadala emerged as the largest investor in 2024, investing $29.2 billion
across 52 different deals. Alongside Mubadala, four other GCC funds — ADIA,
ADQ, PIF and QIA ranked among the top 10 global dealmakers — investing a record $82 billion in 2024. Collectively, this shift away from passive
minority investing and the capacity to lead investments and take controlling
stakes bodes well for deal activity in 2025, according to ION Analytics’
analysis.
Inbound Investments and Foreign Talent
At the same time that the SWFs are taking a more active role in outbound
investments, it has become easier to do business in the region. The GCC
countries are increasingly open to foreign direct investment (FDI), relaxing
restrictive local partnership requirements and streamlining regulatory
processes.
For example, Saudi Arabia’s new investment law consolidates local and foreign
firms under a single investment rule book, leveling the playing field.
Significant recent inbound deals include:
The introduction of “golden visas” allowing for long-term residencies should
help attract foreign talent. Revised rules of property ownership and
inheritance that are more beneficial for foreigners and low taxes are also
likely to make the region appealing to skilled foreigners who can help sustain
and expand the region’s role in global finance.
Further, with energy transition and diversification a key focus regionally, a
more permissive FDI regime led to investments worth approximately $47 billion into the GCC in 2023 alone, with foreign capital investments in Saudi
Arabia accounting for 62% of the total value. The Kingdom of Saudi Arabia is
also aiming to more than triple FDI, from $29 billion in 2023 to $100 billion a year by 2030.
Such goals have also featured heavily in governments’ ambitious national
programs for energy transition, with clean energy investment accounting for
15% of total investment in the sector.
Another source of attracting foreign investment is the GCC funds’
prioritization of investments in cutting-edge industries such as AI and
cryptocurrencies, as in part illustrated by Microsoft’s investment in the
UAE’s G42.
This memorandum is provided by Skadden, Arps, Slate, Meagher & Flom LLP and its affiliates for educational and informational purposes only and is not intended and should not be construed as legal advice. This memorandum is considered advertising under applicable state laws.
See the full 2025 Insights publication
This memorandum is provided by Skadden, Arps, Slate, Meagher & Flom LLP and its affiliates for educational and informational purposes only and is not intended and should not be construed as legal advice. This memorandum is considered advertising under applicable state laws.
