Dubai crossed 100 registered hedge fund managers in December 2025, more than doubling from 50 at the start of 2024, with 81 managing assets exceeding $1 billion.

Oak Hill Advisors, BlueCrest Capital, and Silver Point Capital joined established firms such as Millennium Management and Brevan Howard. Saudi Arabia’s Tadawul reached $2.7 trillion in market capitalization by the end of 2024, a 463% increase over ten years.

These figures reflect structural change. Gulf capital markets are absorbing institutional strategies that require both liquid trading environments and flexible financing structures. Equity-backed financing providers such as EquitiesFirst are positioned to fit into this environment, offering investors ways to unlock capital financed against shareholdings.

“The maturation of Gulf capital markets is not about index returns,” says Al Christy Jr., founder and CEO of EquitiesFirst. “It’s about creating the conditions where sophisticated investors can deploy capital efficiently. That requires tight spreads, deep order books, and financing tools that match the speed of opportunity.”

Trading activity

Margin trading facilities on Saudi Arabia’s Tadawul exchange rose approximately 15% year-on-year in the second quarter of 2025. Dubai Financial Market’s average daily trading value reached AED 524 million in 2025, with foreign investors accounting for 50% of total trading value and holding 21% of total market capitalization.

Abu Dhabi Securities Exchange registered a market capitalization of $574.3 billion, making it the second-largest exchange in the Arab region. Qualified Foreign Investors held SR 337.94 billion (approximately $90 billion) on the Saudi Exchange at the end of December 2025.

Liquidity remains unevenly distributed across the region, but what matters for institutional allocators is the ability to enter and exit positions without material price impact. Oxford Research has linked hedge fund participation to tighter bid-ask spreads and more efficient pricing, particularly in markets transitioning from retail-heavy ownership structures.

The concentration of wealth reinforces this dynamic. Henley & Partners projects that 9,800 millionaires will relocate to the UAE by the end of 2025, the highest net inflow globally. DIFC hosts more than 1,250 family-related business entities and over 470 wealth and asset management firms.

Regulatory opening

Saudi Arabia’s decision to fully open its capital markets to all foreign investors, effective in early 2026, removes one of the final structural barriers to broader institutional participation. The move aligns Saudi financial markets with global standards.

As Gulf markets deepen, demand is growing for financing structures built around equities. Equity-backed financing allows investors to raise capital against existing holdings while maintaining long-term exposure.

“Capital efficiency is the constraint that most investors underestimate,” Christy says. “You can have conviction in a long-term position but still need liquidity.”

Sovereign capital

Gulf sovereign wealth funds collectively manage approximately $6 trillion in assets, more than 40% of the global total. Abu Dhabi’s Mubadala deployed $29 billion across 52 deals in 2024, a 67% increase from the previous year. Saudi Arabia’s Public Investment Fund surpassed $1 trillion in assets in 2025.

Middle Eastern sovereign investors accounted for approximately 40% of state-investor deal value globally in the first nine months of 2025. That concentration creates gravitational pull. Asset managers follow the money. Hedge funds establish offices where capital concentrates.

2026 outlook

Greater hedge fund participation can also bring higher volatility. Short-term flows and rapid repositioning amplify price swings during risk-off episodes. But while hedge funds may increase short-term volatility, they can also accelerate the correction of mispricing and impose market discipline on underperforming companies.

Meanwhile, trade and investment links between the Middle East and Asia continue to deepen, with Asia-focused funds increasingly using Gulf exchanges as part of broader emerging-market allocations.

“The Gulf is building capital markets that can operate at global scale,” Christy says. “The question is whether the supporting infrastructure—trading strategies, regulatory frameworks, and financing solutions—can keep pace with the ambition.”