Arab investment companies have played an increasingly important role in the economic development of Middle East region. As major holders of sovereign wealth funds, they invest oil revenue surpluses and manage public pension funds. The largest Arab sovereign wealth funds are located in the Gulf Cooperation Council countries, managing assets worth hundreds of billions of dollars. Main types of arab investment companies include sovereign wealth funds, private equity firms, venture capital firms, etc. Key players include Saudi Arabia’s Public Investment Fund, UAE’s Mubadala, Kuwait Investment Authority and other national sovereign funds.
Sovereign wealth funds – largest investment players
Sovereign wealth funds (SWFs) sponsored by Arab governments are one of the biggest investment players globally. According to the Sovereign Wealth Fund Institute, 5 of the top 10 largest SWFs are located in the Middle East – Abu Dhabi Investment Authority, Kuwait Investment Authority, SAMA Foreign Holdings of Saudi Arabia, Qatar Investment Authority and Investment Corporation of Dubai. Their assets under management total in the trillions of dollars range. These SWFs invest domestically and internationally to diversify national revenue sources away from just oil and gas. They focus on long-term returns and have the advantage of no short-term liabilities.
Private equity and venture capital firms
Apart from SWFs, there is a growing number of private equity and venture capital firms based in the Arab world. Notable examples include Saudi Arabia’s STV, UAE’s MVision Private Equity Advisers, etc. They provide growth capital for companies in exchange for equity stakes and benefit from value appreciation. Sectors invested include technology, healthcare, consumer products, etc. The Dubai International Financial Centre has created a conducive environment for international private equity firms to set up Middle East offices.
Investment subsidiaries of banks
Many major Middle Eastern banks have created investment banking and asset management subsidiaries, such as NCB Capital and Alawwal Invest of Saudi Arabia. They offer services like IPO underwriting, brokerage, proprietary trading, investment research, and discretionary portfolio management for institutions and high net worth individuals. The fast growing GCC stock markets provide abundant opportunities for their investment banking activities.
Family investment firms
There are many prominent family investment firms in the Arab world managing the commercial interests of wealthy families. For instance, Saudi Arabia’s Olayan Financing Company belongs to the Olayan family, while UAE’s Al Fahim Group is owned by the Al Fahim family. They make private equity investments and operate businesses under their ownership across real estate, financial services, industrials, etc.
Arab investment companies such as sovereign wealth funds, private equity firms and family investment vehicles play important roles in the Middle East economy. They provide growth capital for companies, introduce international expertise and best practices, and facilitate economic diversification away from oil and gas.