In a capital-rich GCC, middle markets remain underserved

The GCC is frequently described as capital-rich, yet segments of its private markets remain structurally underfunded. While liquidity is abundant at the sovereign and large corporate level, financing gaps persist further down the capital stack, particularly in middle markets.

For Waleed Abdulaziz, founding partner and chief investment officer of Gulf Partners Group, the issue is not capital scarcity but deployment dynamics.

“The GCC overall is a net exporter of capital, so it’s not really an issue of capital availability. The opportunity is more around risk appetite and coverage.”

The firm sees opportunities in middle-market companies, segments often underserved by both banks and global funds.

The prospects are particularly evident in transactions that fall outside conventional underwriting frameworks. Sub-US$100 million deals, service-oriented businesses with limited hard collateral and situations requiring bespoke structuring often struggle to secure traditional financing.

“Private credit fills gaps where banks cannot, whether due to loan-to-value limits, profit coverage thresholds or structuring constraints. That’s where genuine entry points are created,” Waleed tells IFN Investor.

Although GCC banking systems remain well-capitalized, regulatory parameters and internal credit metrics can restrict flexibility around leverage, tenor and non-amortizing structures. This leaves a segment of the market underpenetrated rather than overcrowded, with more opportunities than dedicated pools of capital.

On the equity side, pricing efficiency has tightened considerably over the past decade. High-quality companies are now widely covered by regional and international PE firms, sovereign-backed investors, strategic buyers and IPO markets, limiting arbitrage-driven returns.

However, relative value persists. GCC valuations continue to trade at a discount to developed markets, supported by favorable demographics, macrostability and dollar pegs. The clearest opportunity lies in companies with sub-US$500 million valuations that hold defensible leadership positions in niche sectors.

Structure, in this environment, becomes central to investor participation. Rather than raising blind-pool vehicles, the firm operates on a deal-by-deal basis, presenting identified investments to investors for review and participation.

“With blind pools, capital is committed first and deals come later, which creates the risk of strategy creep. With deal-by-deal, the investment is identified first and then presented to investors, who can review the opportunity and decide whether to participate.”

Backed by Arzan, a publicly listed institutional investor, the firm intends to deploy US$2.5 billion over the next five years within what it describes as a fully institutional underwriting framework that combines regional origination expertise with disciplined execution.

As Saudi Arabia and the UAE continue to anchor regional growth, middle-market capital solutions may define the next phase of GCC private markets, where capital is plentiful, but precision deployment remains the differentiator.