Private markets on the move

A&O Shearman’s latest report focuses on global trends and spotlights the Middle East’s accelerating role in shaping the future of private credit and alternative investments across various sectors.

As private markets surge toward an estimated USD29 trillion by 2029 (Preqin), the Middle East is emerging not just as a sector participant – but a powerful architect. From fee structures to fund innovation, regional investors are reshaping global fund terms, demanding transparency, and driving strategic capital deployment across sectors including energy infrastructure, artificial intelligence and private credit.
As global and regional players navigate this shifting terrain, the interplay among regulatory developments, technological innovation, and evolving investor expectations is set to define the next chapter of private markets. Here we explore the transformative trends defining global private markets in 2025, with a spotlight on the Middle East’s increasingly influential role.

1. Rethinking fees: the decline of “2 and 20”

The traditional “2 and 20” fee model is under pressure. In the Middle East, where SWFs and institutional investors are playing a more prominent role, there is a growing expectation for tailored fee arrangements and enhanced transparency. Regional limited partners (LPs) are leveraging their scale to negotiate more favorable terms, particularly in large or strategic mandates.|

Key developments include:
• Declining headline fees: Sub-2 per cent management fees are now common, except in venture capital.
• Tiered and customised structures: Fee structures are becoming more bespoke with tiered rates based on factors such as commitment size, timing and strategic relationships. Investors may benefit from discounts for early or large commitments.
• Performance-linked fees: Some funds offer reduced base fees with higher carried interest tied to return thresholds.
• Transparency push: There is a push for greater disclosure of fees and expenses, including ancillary fees charged by general partners (GPs) in order to ensure alignment.

Middle Eastern LPs are leveraging their size to influence global fund terms, setting new benchmarks for fee alignment.

2. Waterfall structures: hybrid models gain ground

Distribution waterfalls of how profits are shared among GPs and LPs are evolving. The European “whole-of-fund” model is gaining traction in the Middle East, offering LPs full capital return plus preferred return before GPs earn carried interest.

Hybrid waterfalls blending elements of European and American models, are also emerging:
• Carried interest: allowing GPs to receive some carried interest on a deal-by-deal basis, but only after certain fund-level thresholds are met.
• Interim catch-ups: GPs earn carried interest after LPs reach a specified return – but before full fund-level profit realisation.
• Tiered carry rates: GPs receive escalating carry based on fund performance (e.g., 10 per cent at 8 per cent IRR, 20 per cent at 15 per cent IRR). These tiers are structured around IRR or multiple-on-invested capital (MOIC hurdles).

Middle Eastern investors are driving adoption of these structures to ensure fair upside sharing and risk mitigation.

3. Secondaries and continuation funds: liquidity reimagined

With traditional exits constrained, secondaries and GP-led continuation funds are booming. In 2024, global secondaries hit USD162 billion up 45 per cent year-on-year with continuation vehicles comprising 84 per cent of GP-led secondaries deals (McKinsey).
Middle Eastern investors are embracing these tools to:
• unlock early liquidity;
• rebalance portfolios; and
• extend holding periods for high-quality assets.
This flexibility is vital as regional allocations to private equity and alternatives continue to rise.

4. Fundraising and performance: a new reality

Fundraising timelines are lengthening. Globally, the median time to close a private equity fund reached 21.9 months in 2024, up from 14.1 months in 2018 (McKinsey, 2025). In the Middle East, relationship-driven capital flows and investor selectivity are extending cycles.

Performance metrics are also shifting:
• DPI (Distributions to Paid-In Capital) is gaining prominence as a measure of realised value and liquidity.
• MOIC (Multiple on Invested Capital) and standardised reporting are becoming essential for meaningful comparisons.

Transparency and track record are now prerequisites for capital commitments.

5. Innovation in fund structures: evergreen and retailisation

To meet demand for flexibility and access, fund structures are evolving. Evergreen and semi-open-end funds, which allow continuous inflows and periodic liquidity, are gaining traction—particularly among Middle Eastern family offices and high-net-worth individuals.

Key trends:
• Evergreen funds: These stood at USD350 billion in Assets Under Management (“AUM”) globally as of March 2024 (Preqin).
• Retailisation: Private wealth allocations to alternatives are expected to triple over the next decade.
• NAV-based lending: GPs borrow against fund NAV to support distributions and new deals.

Middle Eastern investors are at the forefront, embracing these innovations to diversify portfolios and unlock liquidity.

6. Co-Investments: control, transparency, and value

Co-investments are transforming LP-GP dynamics. Co-investments are gaining ground, offering LPs greater control, lower fees, and deeper alignment with GPs. In a fee-sensitive environment, bypassing traditional fund structures isn’t just appealing – it’s strategic.
According to McKinsey’s 2025 report, co-investment AUM has grown 20–25 per cent annually since 2020, now exceeding USD2.5 trillion globally. Middle Eastern SWFs and family offices are leading this charge, favoring structures that offer influence and alignment.

7. GP Stakes: strategic partnerships and revenue diversification

GP stakes minority investments in private equity firms are gaining popularity. According to McKinsey’s 2025 report, fundraising reached USD4.4 billion in 2024, with SWFs and family offices driving demand.

Benefits include:
• access to management fees, carry, and balance sheet income;
• strategic influence over platform growth; and
• resilience through recurring revenue.

Middle Eastern LPs are using GP stakes to deepen partnerships and align with global expansion strategies.

8. Regulatory evolution: governance and transparency

Regulatory scrutiny is intensifying. Global bodies like ILPA (Institutional Limited Partners Association – which represents LPs in the private equity industry), are pushing for standardised reporting and performance metrics. Middle Eastern LPs are demanding robust disclosures to benchmark performance and negotiate terms confidently.
While offering liquidity, NAV loans require careful governance. Regional investors are actively engaging GPs to set expectations on usage, oversight, and transparency.
Technology and standardisation are paving the way for real-time reporting and sophisticated risk analytics.

9. Energy infrastructure: The Middle East’s green revolution

The Middle East is becoming a global hub for energy infrastructure investment. Governments across the GCC are prioritising renewables, hydrogen, and digital infrastructure.

Across the region, we’re seeing trends such as:
• A surge in data center investments, particularly in Saudi Arabia, driven by the adoption of AI and cloud technologies
• Infrastructure deal value in EMEA grew by 10 per cent in 2024, with the Middle East as a key driver (McKinsey, 2025)
• Strategic partnerships among global managers, regional SWFs and institutional investors

Saudi Arabia’s Vision 2030 and UAE’s foreign ownership reforms are creating a robust pipeline of investable projects.

10. AI leadership: building a regional ecosystem

Middle Eastern SWFs are not just investing in global AI, they’re building local capabilities. Dedicated funds, research centers, and talent programs are fostering innovation across healthcare, logistics, and smart cities.
By partnering with global tech giants and VCs, regional investors are accelerating the transfer of expertise, talent and IP to local markets.
The result: a vibrant AI ecosystem with private markets at its core.

11. The Middle East as a new pillar of growth for private credit

Private credit is surging. In 2024, global fundraising reached USD166 billion, with direct lending accounting for USD122 billion (McKinsey, 2025).
The Middle East is embracing mid-market direct lending, asset-backed solutions, NAV financing, leasing and significant risk transfer (SRT) transactions.AAAAAAAAA

Key drivers:
• Regulatory reforms in ADGM and DIFC for private credit funds
• SWFs are not only involved in capital deployment but also in setting new standards for governance, innovation and cross-border collaboration
• Private credit market could reach USD20 billion in GCC and Egypt by 2030 (PwC)A

Local players like Rasmala, Ruya Partners and Shorooq Partners are active, creating a dynamic ecosystem of innovation and capital.
The Middle East is no longer a passive allocator it is a strategic architect of private markets.

CONCLUSION
As the region continues to diversify its economies and build institutional capital, we can expect its influence to deepen, shaping the future of private markets across all sectors, geographies, and asset classes.

Text by:

1. Kamar Jaffer, partner, A&O Shearman
2. Rory Page, senior associate, A&O Shearman
3. Marcus To, senior associate, A&O Shearman