The US market for PE, long a bastion of institutional investors, is undergoing a profound transformation that could open a significant window to Shariah compliant investments.
“Capital is moving from public markets to private markets,” said Amir Memon, investment director at Princeton University Investment Company, referring to the US landscape for PE. “That is a foundational trend that’s been happening for the last 30 years, and it’s continuing.”
But while Islamic funds have been finding their way across the larger part of North America after being concentrated once in only Canada, the domestic US market hasn’t seen these products presented in the most accessible way yet, Amir shared at the recent IFN Investor Americas Forum 2025 in New York, noting the low Shariah penetration in the US for PE.
The ongoing shifts in the North American PE landscape, however, represent a prime opportunity for Islamic finance to deepen its roots in the US financial system.
Opportunity to deepen US presence, create the right PE product
It was noted that PE was no longer regarded as merely an “alternative” investment, as the next major wave would be “democratization” of the market that would extend access beyond large foundations, endowments, public pensions and global sovereigns to multi-family offices, ultra-high net worth individuals and the broader high-net-worth community.
Furthermore, such rounding out of the market creates a great opportunity for the right product to be offered in a way that’s tailored specifically to the needs of the community.
For Shariah products, specifically, there’s an opportunity to really craft the right product for this segment that can be hopefully well-received.
The humble elevator can give Shariah PE a meaningful lift
Additionally, it was pointed out that while not all PE is created equal when viewed through a Shariah lens, certain segments naturally align more favorably with Islamic finance principles. “Private equity is a broad bucket even within itself,” the Princeton portfolio official said, differentiating between venture capital, large-cap buyouts and strategies like growth equity or “lower middle market PE.”
It is this “lower middle market” that is particularly compelling for Shariah compliant investors. By definition, these are funds managing less than US$1 billion, typically acquiring companies with enterprise values ranging from US$50 million to US$100 million.
A relatable example that was mentioned was in a real estate offering: This building has an elevator, for instance. So, the elevator needs to be serviced. So, you’re buying a company, for instance, that will come in and service the elevators for this business.
Such companies are attractive because they generate good earnings and cash flow.
The ideal combination: Classic Shariah play, respectable PE target
It was observed that crucially for Shariah compliance, companies tend to be smaller, requiring a lot less leverage than larger transactions. Many times, they’ll easily qualify, having less than a third of the capital stack below the leverage threshold.
Amir noted that the growth strategy for these businesses typically involves professionalizing teams, accelerating sales and marketing as well as investing in research and development, rather than relying heavily on debt – making them classic Shariah business models as well as respectable PE targets.
“What I just described is a lower middle market transaction that is bought at a lower price than a larger transaction size; has less leverage and is an industry that I don’t think anyone, even the Shariah scholars, would object or have any question about the Shariah authenticity of it.”
For Amir, his segment represents a “really attractive part of the market” that, “if you execute it well, should generate very high returns.” He emphasized that by focusing on industries and capital structures that inherently lend themselves to Shariah compliance, Islamic private equity can not only adhere to its ethical framework but also deliver competitive, high-performing portfolios.
The message is clear: the path to greater penetration for Islamic private markets in the US lies in identifying and developing products that are both Shariah compliant and financially compelling for a broader investor base.
