The influence of state-owned investors (SOIs) in private equity and credit markets is poised to grow in 2025, reflecting a transformation in global investment strategies.

Though not a new phenomenon, research consultancy Global SWF said Abu Dhabi funds are leading this trend after the onset of the pandemic.

Over the past four years, ADIA has acquired stakes in Corient, in Fisher Investments (with Lunate), and in Hargreaves Lansdown. ADQ has invested in Sagard and in Plenary Group, while Mubadala has acquired stakes in Corient’s parent company CI Financial, as well as in Silver Lake, Fortress, and Silver Rock.

This strategy is likely to continue as the boundaries between limited partnerships and general partnership blur further, allowing SOIs to deepen their influence and operational expertise in alternatives, Global SWF said.

Private credit

Private credit had its moment in 2024. With the global private credit market doubling to $ 1.7 trillion since 2018 and is projected to approach $3 trillion by 2030, investors are aggressively pursuing opportunities.

As traditional banks pull back from lending due to regulatory pressures and economic uncertainties, private credit fills the void. SWFs, especially the ones from the Middle East are at the forefront of the private credit surge, Global SWF said.

Projections suggest that SOIs could collectively reach $60 trillion in 2025 and $7 trillion by 2030, as Gulf nations progress toward their ambitious economic visions.

ADIA has anchored several initiatives, including Pemberton’s $1 billion net asset value financing strategy. Mubadala established a $1 billion partnership with Goldman Sachs to invest in private credit across APAC, and a $2.5 billion private credit platform targeting middle-market companies in the US with Apollo Global.

With SOIs leading the charge, private credit could bridge the gap between traditional banking and the growing demand for bespoke financial solutions. However, it’s not without challenges.

Higher interest rates and economic uncertainty pose risks to borrowers’ balance sheets. However, these factors also create opportunities for investors to acquire distressed assets at discounted valuations. Private credit’s flexibility, tailored solutions, and resilience to market volatility make it an attractive asset class for institutional investors, Global SWF said.

(Writing by Seban Scaria seban.scaria@lseg.com; editing by Brinda Darasha)