Saudi Wealth Fund Unit to Plow More Money Into Private Credit

A unit of Saudi Arabia’s Public Investment Fund plans to increase its investment in private credit, aligning with broader Gulf trends. Jada Fund of Funds, a subsidiary of the PIF, recently agreed to partner with India-based venture debt firm Stride Ventures to channel more capital into the Saudi market. Stride aims to deploy $200 million in the kingdom over the next two years.

This move comes as private credit markets in the U.S. face growing scrutiny over valuation practices and lending standards. New York-based Blue Owl Capital Inc. recently halted one of its funds, triggering a decline in its stock and raising concerns in the $1.8 trillion private credit space.

Jada Chief Executive Bandr Alhomaly said the unit will continue to focus on financing small and medium-sized enterprises through private credit. This strategy aligns with the broader PIF agenda to support Crown Prince Mohammed bin Salman’s economic diversification plan.

Why Did This Happen?

Gulf investors are increasingly looking to private credit as an alternative to traditional banking. Saudi banks have been slowing their lending growth, prompting the need for alternative financing sources. Jada’s investment with Stride marks its third private credit deal, with a focus on local SMEs. Alhomaly noted that the Saudi market is still in its early stages, making it a high-priority asset class.

How Are Other Gulf Investors Responding?

Other Gulf investment authorities are also increasing their private credit exposure. The $580 billion Qatar Investment Authority is investing in a private credit firm run by former Goldman Sachs partners. In Abu Dhabi, Mubadala Investment Co. has been a key backer of private credit strategies.

Jadwa Investment Co. is also raising funds for new private credit initiatives, while Jada-backed Ruya Partners is targeting $400 million in new capital. Omar AlYawer, a Ruya partner, noted that private credit in the region is just beginning and that there is no bubble yet.

What Are Analysts Watching Next?

Jada’s strategy emphasizes investing in funds that operate within Saudi Arabia, ensuring that capital stays local. Alhomaly said the fund typically requires that any investments have a strong domestic presence. This focus reflects the PIF’s broader mandate to develop the local private capital ecosystem.

Alhomaly also acknowledged that more regulation may be on the horizon as private credit grows in size. While the current pool of players is expanding, he said the market is still in its infancy. This suggests that regulatory oversight could increase as the asset class matures.

Jada has deployed nearly $600 million across 50 funds since its 2018 launch. Its focus on venture capital and private equity has helped drive capital to SMEs. This latest foray into private credit represents a strategic shift aimed at supporting the kingdom’s economic transformation.

The global private credit market is maturing rapidly, with concerns growing about valuations and risk. However, the Middle East remains an early-stage market with significant room for growth. Alhomaly said the Saudi fund sees this as an opportunity to act as a catalyst for private capital investment.

Ruya Partners’ AlYawer echoed this sentiment, noting that the challenges seen in the West do not apply in the same way to the region. He said the market is still in its early phase, with no signs of overvaluation.