Opportunities for MENA & APAC Private Capital & US Tariffs

Executive Summary

This report examines the evolving landscape of private capital markets in the Middle East and North Africa (MENA) and Asia-Pacific (APAC) regions in light of recent US tariff implementations. Drawing on comprehensive market data, we analyze how changing trade dynamics are reshaping investment opportunities across these regions, identify potential growth sectors, and provide strategic recommendations for investors seeking to capitalize on emerging trends.

Key observations:

MENA private capital markets are demonstrating resilience and growth potential, with PE deal value reaching $13.7 billion across 147 transactions in 2024, marking the fifth consecutive year exceeding $10 billion
APAC markets face immediate disruptions from recent US tariffs, but longer-term restructuring presents strategic investment opportunities in domestic consumption, regional integration, and infrastructure
Cross-regional capital flows between MENA and APAC are accelerating, creating new investment pathways as both regions look to diversify from Western market dependencies
Alternative investment strategies including private credit, secondaries, and sector-specific opportunities are emerging in response to these shifting dynamics

1. MENA Private Capital Landscape

1.1 Market Overview

MENA's private capital markets have shown remarkable stability despite global headwinds. The region recorded $13.7 billion in PE deal value across 147 transactions in 2024. While this represents a 19.2% decline year-over-year, it continues a trend of robust activity, with five consecutive years exceeding $10 billion in deal value.

VC investment in the region has moderated to $2.8 billion across 678 deals in 2024, reflecting a broader normalization after pandemic-era peaks. However, Q4 2024 showed strong momentum with $1.2 billion in VC deals, suggesting renewed investor confidence.

1.2 Regional Shifts and Opportunities

Saudi Arabia is demonstrating increasing prominence as a venture capital hub, with a 41.6% YoY increase in deal count to 143 in 2024. This growth aligns with broader economic diversification efforts and government-backed initiatives to foster innovation.

United Arab Emirates continues to lead the region in total VC deal volume, though its relative share has decreased slightly as Saudi activity grows.

Turkey has implemented new tech visa programs to attract skilled talent, creating opportunities in fintech and digital sectors despite experiencing a 42.7% YoY drop in VC deal count to 137.

1.3 Sector Focus

Several sectors present compelling opportunities:

Technology and Digital Payments: MENA's fintech ecosystem is rapidly expanding, exemplified by the $385 million acquisition of Neopay by Arcapita and DgPays. Digital payment providers are competing aggressively as the region transitions from cash to digital transactions.

Education: The Saudi Education Fund (SEF) closed at $300 million and promptly acquired a $230 million portfolio of international schools, highlighting opportunities in this government-prioritized sector.

Infrastructure and Energy Transition: Investments in grid capacity, data centers, and sustainable infrastructure are growing across the region, with Oman's Vision 2040 driving strategic investments in these sectors.

2. APAC Markets Under US Tariff Pressure

2.1 Immediate Impact Assessment

The recent implementation of US tariffs has created significant disruption across APAC markets. China and India face 34% and 27% tariffs respectively, with immediate effects visible in public market declines and private market reassessment.

Early data shows declining exit activity, with PE exits in Q1 2025 dropping to just $19.3 billion across 73 transactions, and VC exits declining to $6.8 billion across 112 deals.

2.2 Emerging Opportunities

Despite these challenges, several strategic opportunities are emerging:

Domestic Consumption Markets: Countries with large internal markets like India, Indonesia, and the Philippines are positioned to weather external trade disruptions with less impact on valuation and growth potential.

Regional Integration: Accelerating intra-regional trade will drive investment opportunities in cross-border logistics, warehousing, and digital trade enablement tools. The China-Japan-South Korea trilateral trade pact exemplifies this trend toward regional economic integration.

Credit Strategies: Private credit is expanding as traditional bank financing tightens, with opportunities in direct lending to corporates facing liquidity challenges and special situations funds targeting recapitalizations.

2.3 Market-Specific Considerations

India emerges as a potential beneficiary with relatively limited tariff exposure and positioning as an alternative manufacturing hub to China. Infrastructure, renewable energy, and consumption-led sectors present particular promise.

Southeast Asia faces mixed impact, with traditional export-oriented manufacturing models under pressure, but opportunities in domestic consumption and regional integration.

3. Cross-Regional Investment Flows

Analysis of cross-border investment patterns reveals increasing capital flows between MENA and APAC regions.

3.1 MENA Investment in APAC

MENA-based investors participated in a record $41.2 billion of North America-based VC deals in 2024, but are increasingly diversifying toward APAC markets. Key sovereign wealth funds and institutional investors from the UAE and Saudi Arabia are expanding their presence in India, Southeast Asia, and broader Asian markets.

3.2 APAC Investment in MENA

Asian investors, particularly from China, Japan, and South Korea, are targeting MENA's infrastructure, technology, and energy sectors. This trend is likely to accelerate as US tariffs drive capital reallocation strategies.

3.3 Strategic Rationale

This cross-regional investment acceleration is driven by:

Economic diversification strategies in both regions
Reduced political risk compared to US and European markets
Complementary sectoral strengths
Shared interest in developing trade corridors independent of Western markets

4. Alternative Investment Strategies

4.1 Private Credit Expansion

Private debt strategies are gaining traction in both regions:

In MENA, private debt raised $196.1 billion globally in 2024
In APAC, private credit is expanding to fill gaps left by cautious traditional lenders
Direct lending, mezzanine financing, and special situations funds present opportunities

4.2 Secondaries Market Growth

The secondaries market has shown remarkable strength, with global fundraising reaching $101.6 billion in 2024, a 29.1% increase year-over-year. This counter-cyclical growth presents liquidity opportunities for investors in both MENA and APAC portfolios.

4.3 Sector-Specific Opportunities

Data Centers: Increasing data consumption in both regions (APAC projected to reach 59 gigabytes per user per month by 2030) is driving investment in digital infrastructure.

Education: Strong government backing in Saudi Arabia and across APAC creates growth opportunities.

Healthcare: Healthcare investments have remained robust in both regions despite market fluctuations.

5. Key Risks and Mitigating Factors

5.1 Geopolitical Uncertainty

Ongoing geopolitical tensions present risks to cross-border investment flows. Investors should develop flexible strategies that can adapt to changing regulatory environments.

5.2 Exit Environment Challenges

The exit environment in both regions faces challenges:

In MENA, 2024 PE- and VC-backed exit activity dropped 42.2% YoY
In APAC, public listing activity has declined due to market volatility
Extended holding periods may be necessary for investments made during this period

5.3 Valuations and Due Diligence

Valuation disparities are emerging in both regions, requiring enhanced due diligence and flexibility in structuring investments.

6. Strategic Recommendations

For investors considering opportunities in MENA and APAC markets in the current environment, we recommend:

Prioritize domestic consumption and regional integration plays over export-dependent business models
Explore private credit strategies as complementary to traditional equity investments
Consider market-specific approaches:
- In MENA: Saudi Arabia, UAE, and technology/digital payments sectors
- In APAC: India, Indonesia, and regional infrastructure/logistics
Implement enhanced due diligence focused on tariff exposure, supply chain resilience, and currency risks
Evaluate investment structures that accommodate longer holding periods and flexible exit strategies
Explore secondaries opportunities for market entry at potentially discounted valuations

7. Conclusion

The evolving landscape of US tariffs is reshaping investment dynamics across MENA and APAC private capital markets. While presenting near-term disruptions, these changes are creating strategic opportunities for investors able to adapt their approach to capitalize on shifting capital flows, sector realignments, and cross-regional synergies.

The complementary strengths of these regions, combined with their growing economic integration independent of Western markets, present compelling long-term investment opportunities despite current volatility.