KSA’s fund reforms
Clyde & Co examines Saudi Arabia’s latest CMA measures, which open financing investment funds to public offering and listing while introducing stronger governance, disclosure and risk control requirements across the sector.
The Capital Market Authority (CMA) of Saudi Arabia has introduced a notable development in the Kingdom’s investment funds regime by permitting financing investment funds to be publicly offered and listed. Previously restricted to private placements, these funds may now be offered to the public and admitted for trading on both the Main Market and the Parallel Market.
These reforms follow the CMA Board’s issuance of the updated Instructions on the Financing Investment Funds under Resolution No. 4-15-2026 dated February 11, 2026 (the “Instructions”). The Instructions form part of the wider regulatory framework governing investment funds, alongside the Capital Market Law and the Investment Funds Regulations, and aim to expand financing solutions while enhancing regulatory oversight.
SCOPE AND CLASSIFICATION OF FINANCING FUNDS
The Instructions regulate the establishment, offering, management, and operation of investment funds designed to conduct financing activities (“Financing Funds”). They introduce a clearer classification between two categories:
- Direct Financing Funds, which provide financing directly to legal persons and investment funds; and
- Indirect Financing Funds, which conduct financing activities through indirect structures such as financing portfolios or similar arrangements.
This distinction provides greater regulatory clarity around fund structures and their underlying financing models.
PUBLIC OFFERING AND LISTING OF FINANCING FUNDS
A central reform is the introduction of public Financing Funds, which may now be offered to retail and institutional investors and listed on either the Main Market or the Parallel Market, subject to applicable listing requirements.
This marks a significant shift in the market, as financing-focused investment funds were previously limited to private distribution channels. The reform is expected to broaden investor access to financing strategies and support deeper capital market participation.
INVESTMENT LIMITS AND LEVERAGE CONTROLS
The Instructions introduce detailed prudential requirements governing public Financing Funds, particularly in relation to leverage and concentration risk.
Key provisions include:
- A borrowing limit of 15 per cent of net asset value (NAV) for public Financing Funds;
- An increased borrowing capacity of up to 50 per cent of fund size for funds listed on the Parallel Market;
- A concentration limit for Direct Financing Funds, whereby exposure to a single beneficiary, or related group of beneficiaries, must not exceed 25 per cent of the fund’s total size.
These measures are designed to support responsible leverage use while limiting excessive concentration risk within portfolios.
ENHANCED DISCLOSURE AND TRANSPARENCY REQUIREMENTS
Public Financing Funds are subject to enhanced disclosure obligations, particularly within their terms and conditions.
These include detailed requirements on credit granting policies, investment decision-making frameworks, and portfolio evaluation methodologies. For Public Indirect Financing Funds, additional disclosures must cover:
- Average days of default across the financing portfolio;
- Sectoral distribution of beneficiaries;
- Exposure percentages by sector and beneficiary; and
- Timing information relating to financing origination.
In addition, fund managers are required to provide periodic reporting to unitholders on key performance indicators, including financing performance, default levels, and portfolio composition. These measures significantly enhance transparency compared to the previous regime.
PRIVATE FINANCING FUNDS: INCREASED FLEXIBILITY WITH GOVERNANCE ALIGNMENT
The Instructions also revise the framework for private Financing Funds. While remaining restricted to private offering, these funds are granted additional flexibility, including the ability to be structured as open-ended funds.
Private Financing Funds are subject to a borrowing limit not exceeding 50 per cent of total fund size.
Importantly, the amendments extend to private Financing Funds the governance framework applicable to private real estate funds under the Investment Funds Regulations. This includes requirements relating to fund boards and the duties and responsibilities of board members, thereby strengthening governance standards across the sector.
Additional obligations also apply to managers of private Direct Financing Funds, reinforcing oversight and accountability in fund operations.
MARKET IMPLICATIONS
The reforms represent a meaningful step in the evolution of Saudi Arabia’s investment funds landscape. By enabling public offerings and listings of Financing Funds, the CMA has expanded the range of available fund structures and broadened access to financing-based investment strategies.
At the same time, the framework maintains a structured and prudential approach. Defined leverage caps, concentration limits, enhanced disclosure obligations, and strengthened governance requirements ensure that market expansion is balanced with investor protection.
Overall, the introduction of public Financing Funds is likely to support the emergence of financing strategies as a more established asset class within the Kingdom’s capital markets, while reinforcing transparency and regulatory discipline.
Text by:
- Alain Sfeir, partner, Clyde & Co
- Elie Mikhael, legal director, Clyde & Co
- Fatima Arrazki, associate, Clyde & Co
