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Joint venture funds in the Middle East market: a model of collaborative investing

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We are seeing increasing interest in joint venture funds in the Middle East region as a model of collaborative investing as investor types are multiplying and looking globally for investment opportunities and greater alignment with managers. Investors such as sovereign wealth funds (SWFs), pension funds and family offices are seeking innovative strategic partnerships to put their capital to work with either other institutional investors, investment managers, banks and/or specialised operating companies.

Also, managers are looking to collaborate with other managers that have a particular expertise in order to expand their product range. These joint venture funds are being established across asset classes (including infrastructure, real estate, private equity and technology) as well as across geographies (eg MENA and sub-Saharan Africa and by way of country-specific funds).

A recent example is CDC International Capital (a subsidiary of the Caisse des Dépôts et Consignations) and Kingdom Holding Company on the establishment of a Saudi joint venture private equity fund to invest in Saudi projects and ventures. Joint venture funds present some unique challenges as each is bespoke, including in terms of structuring the governance and termination arrangements, depending on the identity, role and level of equity participation and involvement of the co-sponsors, as well as what they bring to the table in terms of added value (eg deal origination, expertise and local network etc).

This article discusses some of the issues to be considered in the context of structuring such arrangements.

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