Private Equity in a High-Rate World: Cash-Rich, Deal-Poor, and Changing Fast

Foreword

The sovereign wealth fund universe has entered a new phase: bigger, faster, more interventionist. After a decade of low rates and steady, if unspectacular, allocations across public markets and classic infrastructure, the post-pandemic cycle handed SWFs fresh fuel: commodity windfalls (notably in the Gulf), valuation resets in both public and private markets, industrial policy tailwinds, and the AI build-out. The numbers are eye-catching. Industry trackers estimate total SWF assets reached about $12 trillion by end-2024, with a path to ~$18 trillion by 2030 if current saving and transfer policies hold. This growth is disproportionately powered by the Gulf, where Abu Dhabi, Saudi Arabia, and Kuwait now field multiple trillion-dollar platforms between them.

Yet scale isn’t the whole story. What’s changed is intent. Many of today’s SWFs are no longer just intergenerational savings vehicles seeking broad, low-cost exposure. They’re also instruments of national strategy, expected to accelerate domestic diversification, catalyse new industries (AI, clean energy, logistics, tourism), and attract foreign expertise. Saudi Arabia’s Public Investment Fund (PIF) is the archetype: a capital base now reported at or near the $1 trillion mark, increasingly active across tech, entertainment, infrastructure, and credit, with a funding model that mixes government transfers, retained earnings, and sizable debt facilities.

Meanwhile, Abu Dhabi’s ecosystem has become a magnet for Wall Street and Silicon Valley alike. ADIA (Abu Dhabi Investment Authority) has crossed $1 trillion in AUM and retooled its deal processes to move quickly; across the emirate, the combined firepower of ADIA, Mubadala, ADQ, and other entities is now estimated at around $1.7 trillion. That heft is being deployed not only into classic buy-and-hold assets but also into cycles where speed and structuring edge matter, from private credit to AI. 

Below, five angles to understand the new SWF era, and why it matters for managers, founders, and policy makers.

1) The new SWF map: concentration at the top, diversification of mandates

Start with the leaderboard. Norway’s Government Pension Fund Global (GPFG) remains the world’s largest single pool of listed-equity capital, holding ~1.5% of all global public shares and oscillating around the $1.7–$2.0 trillion mark depending on markets and FX. Its model, ultra-broad indexing with tight ethical guardrails, still anchors the industry’s governance norms and sets the pace on stewardship. Even in 2025, Norwegian policy makers continue to debate the mandate’s edges (private equity, defence exposure), but the core remains: a globally diversified, transparent savings fund with exclusions and observation processes codified in law. Recent headlines about divestments related to Israel and Gaza show how the fund’s ethics machinery responds to evolving political risk, even as managers resist blanket country bans. 

In Asia, Singapore’s GIC and Temasek play complementary roles: GIC as the long-horizon allocator across the full spectrum (from public equities and real assets to venture and growth), Temasek as an active owner shaping national and regional champions and taking thematic tech bets. In China, the China Investment Corporation (CIC) has extended its platform well past its 2007 origins, managing over a trillion dollars by mid-decade while juggling overseas returns with domestic financial-stability objectives. These players tend to be quieter than their Gulf peers, but in sectors like logistics, data infrastructure, and advanced manufacturing, they are often early, patient capital. 

The standout shift, however, is the Gulf. Saudi Arabia’s PIF, Abu Dhabi’s ADIA and Mubadala (alongside ADQ and others), Qatar Investment Authority (QIA), and Kuwait Investment Authority (KIA) now account for an outsized share of new, discretionary sovereign capital deployed into private markets. In mid-2025, trackers placed PIF, ADIA, and KIA in the SWF “trillion-dollar club,” with Gulf entities responsible for two-thirds of all new SWF deployment in 2023 and a strong clip through 2024. These funds are building domestic industries and exporting capital, and influence, through cross-border partnerships, co-investments, and marquee deals. 

2) The toolkit expands: private credit, fast partnerships, and “capital + capability”

One of the clearest allocation pivots is into private credit. As I mentioned in our last insight, private credit is a fast-growing industry with base rates higher and banks constrained by capital and regulatory limits. This has caused SWFs to lean into direct lending, asset-based finance, and hybrid solutions that offer yield with negotiated downside protection. Survey evidence from 2025 shows private credit adoption among SWFs climbing into the 70%+ range, with half increasing allocations year-on-year. What began as a niche diversifier is now a strategic pillar. 

This isn’t only about writing checks into third-party funds. It’s also about building origination pipes and underwriting capacity via partnerships with banks and specialist managers. Abu Dhabi, for instance, backs platforms that pair universal banks’ deal flow with alternative-style underwriting; Barclays’ tie-up with AGL is a crisp example of the model. Expect more bank-plus-allocator partnerships as SWFs seek fees, governance rights, and access in one package. 

The “capital + capability” pattern shows up well beyond credit. Saudi Arabia’s PIF has struck MOUs to anchor region-focused vehicles run by global asset managers, aiming to import processes, talent, and market-making know-how into the Gulf while directing fresh flows into local equities, credit, and pre-IPO pipelines. It’s industrial policy via asset management, and it’s pulling big brands to set up in Riyadh and Abu Dhabi at a rapid clip. 

And the operating model inside funds is changing too. PIF says AI and automation now touch “every layer” of the organisation, from sourcing to portfolio monitoring, which is a preview of where large allocators are headed: always-on data pipelines, model-assisted due diligence, and risk systems built for opaque, private assets. 

3) Sector priorities: AI, chips, digital infra, and yes, sports

If 2010s SWFs were synonymous with toll roads, ports, and pipelines, 2025 SWFs are about compute, data, and the software stack that sits on top. Abu Dhabi launched MGX in 2024 as a flagship AI investment vehicle backed by state entities Mubadala and G42, with a mandate that spans semiconductors, model training, cloud, and data applications. Reports through 2025 show MGX courting global co-investors and building out fund-of-funds and direct strategies aimed at scaling AI capacity across the Middle East and beyond. The UAE’s playbook: attract hyperscalers and chip ecosystems, build talent pipelines, and leverage SWF balance sheets to de-risk early projects. 

Saudi’s PIF has taken a similarly expansive view, placing capital across EV supply chains, gaming, media, and fintech while funding domestic green-energy and giga-projects (NEOM, Red Sea, Diriyah). The through-line is technology enablement, datacenters, cloud, fiber, AI services, plus consumer-facing content that builds regional soft power. With balance sheets of this scale, SWFs can finance both capex-heavy assets (power, cooling, land) and the software/service layers that ride on top. 

Private credit overlaps here too: structured financing for chip equipment, second-lien loans to datacenter rollups, revenue-based facilities for AI-native software. Allocators like ADIA have publicly emphasized expanding private-market sleeves, while Abu Dhabi and Saudi credit facilities give funds ample dry powder to move quickly when big platform deals surface.

Then there’s sport, a visible, sometimes controversial vector of soft power. Qatar’s QIA broadened its sports footprint with a stake in Audi’s Formula One team, adding to a portfolio that already included PSG (via Qatar Sports Investments) and global event hosting. The rationale transcends trophy assets: global brand building, tourism, media rights, and place-making. Expect more league-level and team-level deals where SWFs partner with private equity and specialist funds to underwrite venue upgrades, content, and technology. 

4) Governance, geopolitics, and the Santiago Principles stress-test

SWFs sit at the intersection of finance and geopolitics. That makes governance design, purpose, mandate, and autonomy a first-order issue. The Santiago Principles, a voluntary code launched in 2008, still provide the industry’s common language around transparency, investment independence, and accountability. But after 15+ years, practitioners increasingly argue the code needs updating for an era of state-aligned industrial policy, cross-border tech controls, and systemic cyber risk. The discussion isn’t academic; access to sensitive assets and data often hinges on how credible a fund’s governance looks to host countries. 

Norway’s GPFG again illustrates how governance choices ripple out. Oslo has kept the fund out of private equity despite repeated management requests, wary of opacity and potential political spillovers. The fund’s exclusions list, ethics council, and parliamentary oversight also make it the world’s reference case for values-driven sovereign investing, sometimes forcing difficult calls, as seen in 2025 decisions around Israeli holdings and in ongoing debates over defence exposure in the wake of war in Ukraine. These choices carry signalling value for peers and for companies seeking long-term sovereign partners. 

On the other side of the spectrum sit strategic investment funds mandated to transform domestic economies. Their challenge is the mirror image: show enough independence to win foreign trust while staying close enough to the government to deliver on national objectives. That tension is now front and centre in AI, semiconductors, and critical infrastructure deals where CFIUS-style scrutiny applies. Funds that can demonstrate robust governance and ring-fence sensitive tech will secure better deal access and cost of capital.

5) What it means for investors, founders, and policymakers

For private equity and venture: 

SWFs have become both LPs and direct competitors. As LPs, they’re concentrating relationships (bigger checks to fewer managers), demanding co-invest rights, and asking for line-of-sight into climate, cyber, and AI-risk tooling. As direct competitors, they can outbid for trophy assets or provide patient rescue capital to late-stage companies that need runway. The impact on exit markets is ambiguous: on one hand, sovereign co-invest pools can help get larger buyouts over the line; on the other, direct sovereign ownership can remove assets from the churn that feeds traditional secondary markets.

For credit markets: 

Expect SWFs to remain central to the private credit story, even as surveys in mid-2025 hint at a cooling of allocator enthusiasm at the margin due to competition and transparency concerns. After two breakneck years, pricing and documentation have tightened; still, the structural appeal, yield, speed, bespoke structuring, remains, and sovereign partnerships with banks are likely to expand to asset-based finance and complex structured solutions. 

For founders and corporates: 

The sovereign “term sheet” comes with more than capital. It can include market access, regulatory air cover, long-dated infrastructure, and demand aggregation (e.g., multi-year compute contracts). But it also comes with visibility and occasionally with political expectations. The best outcomes pair clear commercial governance (arm’s-length boards, audit rights) with aligned strategic milestones, especially for AI/semiconductor companies where export controls and data-sovereignty rules are live issues.

For governments and regulators: 

SWF capital is increasingly a lever of economic policy. Expect more programs that blend sovereign anchors with private capital to scale national priorities: clean power, grid upgrades, domestic tourism, logistics, and digital infrastructure. Saudi Arabia’s revolving credit facilities and murabaha financing show how sovereigns are also professionalising their own liability management, important when scaling multi-year capex. The playbook: diversify funding sources, build multiple internal “funds within the fund,” and partner globally to import expertise.

Cases to watch in 2025–2026

Saudi Arabia (PIF): A trillion-dollar fund tasked with delivering Vision 2030 will keep drawing headlines. Watch three arcs: (1) how PIF sequences mega-projects to manage cash burn and achieve operating breakevens; (2) its use of private and Islamic finance tools to smooth funding; and (3) its AI exposure, both as an investor and as a consumer of AI in investment processes. Recent statements emphasise AI embedded “across every layer,” which suggests continued hiring of data scientists and engineers alongside portfolio managers. 

Abu Dhabi (ADIA, Mubadala, ADQ, MGX): The engine room of the Gulf’s most diversified sovereign complex. Expect more “platform + operator” deals where Abu Dhabi provides capital and a regional base while a global partner delivers build-out and talent. MGX gives the emirate a focal point for AI capital formation, from chips to cloud to applications. In parallel, ADIA’s push into private markets and its execution refresh indicate it wants to win contested processes, not just buy core assets. 

Norway (GPFG): The bellwether for governance. Two debates will shape its influence: whether to open a private-equity sleeve at last (so far, a “nei”) and how ethics policies adapt to fast-moving conflicts and defence realignments. Each decision will have copycat effects as other SWFs calibrate their own playbooks. 

Qatar (QIA): A sophisticated allocator with an expanding soft-power portfolio. The 2024 F1 move underscores a broader thesis: sports as an asset class spanning media rights, venues, and IP. Expect continued selective stakes linked to tourism and brand strategy.

Risks and constraints

Sovereign wealth funds face a number of risks and constraints that shape their investment strategies. One key challenge is crowding and return compression. As more patient capital flows into private credit and infrastructure-adjacent markets, competition intensifies, which inevitably puts pressure on returns. Surveys conducted in 2025 already indicate that allocators are rebalancing away from overcrowded private credit trades and from passive long-only equities toward investment vehicles that promise genuine alpha, such as multi-strategy hedge funds or niche credit products. Despite this, sovereign funds retain certain advantages. Their capacity to take larger and earlier positions, coupled with the ability to structure investments for downside protection or embed strategic optionality, allows them to capture opportunities that may be inaccessible to smaller or less flexible investors.

Geopolitical considerations further complicate sovereign investing, particularly in sensitive sectors like AI and semiconductors. These areas are subject to export regimes, sanctions, and national-security reviews, meaning that funds linked to states in strategic competition must carefully design and sometimes limit their investments to maintain access to critical markets. Funds that adhere to internationally recognized frameworks, such as the Santiago Principles, and maintain transparent ownership, investment independence, and robust governance are better positioned to navigate these constraints and participate in sensitive deals without triggering regulatory or political backlash.

Home-market fiscal cycles also influence sovereign wealth fund strategy. Even funds considered highly rule-bound are not entirely independent macro actors. For example, Norway’s draw-down rules and fiscal transfers in Gulf states illustrate how domestic political and economic cycles can affect spending priorities, AUM growth, and risk budgets. Norway’s 2025 decision to lift spending from its Government Pension Fund, while still complying with fiscal rules, demonstrates how even the most disciplined sovereigns must adjust allocations when national priorities shift, highlighting the interplay between governance rules and real-world fiscal pressures.

Finally, public scrutiny and ethical considerations remain ever-present. Divestments or exclusions, whether motivated by conflict exposure, climate concerns, or labor practices, continue to attract attention and shape fund strategy, particularly for the largest sovereign funds. The true test lies in procedural integrity: ensuring that decisions are based on clear criteria, public rationale, and consistently applied standards. Norway’s 2025 divestment decisions regarding Israeli investments, for instance, followed a transparent process with formal announcements that helped separate political considerations from portfolio management. Maintaining such clarity and discipline is crucial for sustaining credibility and trust in the eyes of both domestic constituents and international partners.

Bottom line

Sovereign wealth funds have always been about time horizons. What’s different now is tempo and purpose. A handful of very large funds, concentrated in the Gulf but with important peers in Europe and Asia, are moving faster, going deeper into private markets, and using capital to bend industrial trajectories at home and abroad. The deal-level implication is straightforward: if you’re raising for AI infra, energy transition, complex credit, or platform roll-ups, a sovereign partner may be your most aligned, most patient option. The policy-level implication is trickier: as sovereigns lean into strategic sectors, they will run head-on into governance tests, export controls, and political backlashes. Those that keep their structures clean, have transparent mandates, have strong boards, and have Santiago-aligned processes will win access and cost-of-capital advantages over the long haul.

For investors, the message is to treat SWFs less as a monolith and more as a spectrum. On one end sits Norway’s GPFG: low-cost, global, public-market-oriented, with ethics hard-wired into statute. On the other side sits the strategic fund: bold, domestic-development-driven, building entire sectors from scratch. Both models have their place, and both will shape markets in the next decade. In 2025, with AI and industrial policy redrawing the map, the sovereigns that can combine patient capital with operational speed and demonstrate rigorous governance while pursuing national goals are setting the new standard for state capitalism. For everyone else, the challenge is learning to work with them: design vehicles that respect their mandates, bring real capability to the table, and build trust deal by deal. That’s where the next wave of durable returns is likely to be found.