A new form of investment fund set to be launched by the Kingdom of Saudi Arabia (KSA) will significantly enhance the appeal of the Kingdom’s asset management sector, according to an expert.
The country’s Capital Market Authority (CMA) issued a public consultation on a proposed framework for simplified investment funds in KSA, which would offer greater flexibility and lower costs than traditional funds.
KSA’s asset management sector has become a significant area of growth, with it passing a valuation of SAR 1 trillion in 2024. The KSA government has noted that investment funds represented the largest share of that, at more than SAR 700 billion, as the country looks to diversify its economic approach.
When implemented, the proposed simplified investment funds will enabling offering of fund units to both institutional and international investors, opening up the scope of potential investors. Notably, the proposed framework would also waive the necessity for a custodian when set up as a special purpose vehicle.
Tighter protections for investors have also be included in the proposed offerings which include mandatory independent annual audits and a requirement for records to be maintained for a minimum of ten years.
A consultation into the proposals closed earlier this month.
Marie Chowdhry, a financial regulation expert with Pinsent Masons, said the new funding approach was aimed at encouraging greater international appeal in KSA’s asset management sector, bringing it closer to global capital markets.
“This simplified fund will offer greater flexibility and alignment with global practices, which enhances the Kingdom's position as a financial hub by making its regulatory environment more attractive to both local and international market participants,” she added.
“The CMA’s proposed Simplified Investment Funds regulation introduces several key differences and added value compared to Saudi Arabia’s existing Investment Funds Regulations (IFR); namely, it allows fund managers and unitholders to agree on bespoke contractual provisions which mirror global LP/GP models, enabling tailored arrangements for sophisticated investors; reduces documentation to a simple notification and offering documents, eliminating lengthy approval timelines; waives the custodian requirement for funds structured as Special Purpose Entities, reducing administrative burden and cost; and permits offerings to non-resident foreign investors, Saudi government and public entities, as well as institutional clients, thereby aligning the regime with the CMA’s broader goal of internationalizing the Saudi capital market.”
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