NBK closes Shari’ah direct lending fund at $215m

The fund is the firm’s first sharia compliant direct lending vehicle and received a cornerstone investment from Saudi Arabia’s sovereign wealth fund.

Dubai-based investor NBK Capital Partners has held a final close of its third direct lending fund at $215 million.

The vehicle, NBK Capital Partners Shari’ah Credit Opportunities Fund, launched in 2021 with cornerstone investments from Saudi Arabia’s Public Investment Fund and Abu Dhabi Catalyst Partners. It is the firm’s first sharia compliant credit fund.

It received backing from investors in Saudi Arabia, UAE and the US including insurance companies, financial institutions and family offices and NBK said it received backing from a record number of new investors.

“We’re seeing LPs pivoting back to the region after previously focusing on investing internationally and that really demonstrates the strong prospects for this asset class in the Middle East,” said NBK Capital Partners’ CEO, Yaser Moustafa.

NBK opted to pursue a sharia complaint vehicle for its third-generation fund, not only because it is a requirement to receive backing from the PIF but also to help investors in the region who are struggling to secure yield in a sharia compliant manner.

The fund will focus on investing across the MENA region with a particular focus on Saudi Arabia, UAE and Egypt as its core markets. It will target the business services, healthcare, technology and consumer sectors with investments ranging between $10 million and $30 million, though it is also able to back larger transactions alongside co-investment vehicles.

It has a four-year investment period with the potential to recycle assets. The fund has already backed one deal, a $20 million growth capital financing to UAE-based temporary staffing provider Reach Group and expects to complete another shortly. It expects to be at least 75 percent deployed by the summer of 2023. The fund has a target IRR of between 15 and 17 percent.