Raising Capital? Ignore the Gulf at your peril

As we come towards the tail end of another year, you may be putting your 2024 travel and capital raising budgets together. Well let us make a strong suggestion: whether you’re coming with DXB Partners, or on your own, make sure you allocate a significant portion of said budget (financial and time) to the Middle East. We’ve got no interest in making predictions here – in fact we agree with economist John Kenneth Galbraith who famously said ‘the only function of economic forecasting is to make astrology look respectable.’ So why don’t we talk facts… 

The Landscape

If you’re reading this update, you’ve likely woken up to darkness in North America or Europe (or lucky enough to be in Asia). Thus you’re well aware of the pretty bleak economic environment and particularly for those in ‘cap raising’ mode, just how difficult it’s been to attract investment on home turf of late. Side note: that is unless you’re CVC, Apollo, Permira etc etc. As at the end of Q3 the top 15 funds to hold final close in the first three quarters of this year took in over $225bn…making up c. 40% of total fundraising! So let’s assume you’re not reading this in your Park Avenue corner office (or shall we say ‘pod’) at Citadel, and the thought of introductions to Middle Eastern institutional investors has perked you up more than your second espresso!

Here are those facts we promised:

  • Of the 50 largest sovereign wealth funds ranked by assets under management, 13 are based in the Middle East and include all the Gulf Cooperation Council (GCC) states
  • Diversification is the key feature. Post-pandemic oil and gas prices and the war in Ukraine brought windfalls to sovereign funds, still primarily driven by surplus revenue from exporting commodities. These revenues are being used to mitigate their own, and the global energy transition and incubate technology and expertise at home to build a more dynamic economy
  • Whilst global Q1 2023 early-stage/venture investment was half that of the $162bn invested at the same time in 2022, Saudi Arabia has bucked the trend, recording a quarterly record of $359m-worth of venture investment in Q1 of this year, having grown 72% in 2022!
  • Qatar has the most millionaires per capita in the world
  • In 2021, financial wealth in the UAE grew by 20 per cent, which is double the global growth rate of 11% – 41% of which was generated by UHNWI’s or family offices
  • Dubai has >$515bn of ‘wealth’, the highest in any Middle Eastern city
  • The average Middle East Sovereign’s allocation to alternatives doubled from 22% of total assets in 2021 to 44% in 2022
  • Middle Eastern funds have also transformed their governance and approach. Global Sovereign Wealth Fund’s Governance, Sustainability and Resilience (GSR) report for 2023 found that Middle East funds had the best improvement in governance, sustainability and resilience

What strategies are in high demand?

So there’s just a few stats which we’re hoping at the very least means you’ve got a tab open in your browser checking flight prices to Dubai!

But what strategies are doing well in our region? Clearly alternatives are dominating the headlines, and for good reason. Middle Eastern sovereigns simply ‘get’ patient capital (and of course have the ability to be patient)! This ethos trickles down to Family Offices, many of whom have a global mandate. 

We regularly talk about 5 megatrends: Digital Technology; Climate Change; Emerging Global Wealth; Demographics & Healthcare; and Urbanisation. If you’re a fund manager or founder playing in one (or more) of these areas, it’s a great start. Check out this page to learn more on each one.

How to secure Middle Eastern investment?

If you didn’t know already, you now know why you should be more present in the Gulf, and what strategies give you a better chance of success. But how do you access the abundant capital in the region? Here’s the answer in one sentence: come, come again, keep coming back. We’ve been raising capital in one form or another for over 40 years and we’ve never seen anywhere else where personal face-to-face relationships are so important. If only it was as easy as a great track record! The most important step in the journey to raising capital from the Middle East is to be liked. If you start a meeting by loading up slides on your laptop, eager to present, you’ve already lost. Build relationships, don’t visit once or twice, never to be seen again in region, and if you can, lay out your genuine medium to long-term plan for how you are committing to the Middle East.

If the thought of accessing Middle Eastern capital sounds interesting to you, send us a message – we’d love to hear where you are on your ‘cap raising’ journey and share how our 12-month ‘Cap Intro’ engagements, which maximise face-to-face in-region time, can help you secure Middle Eastern commitments. 

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