While we typically look at overall trends and performance of different market segments in this space, this month we explore a different cut of our dataset: average fund commitment sizes by an LP, based on geography. The analysis includes our two most robust geographies in the dataset, Europe-Western and North America as well as the rapidly growing market of Middle East & North Africa (MENA). We analyze the past 20 years of data for these geographies to best understand how trends have evolved.
The strongest trend over the past two decades is MENA’s consistently lower commitment amounts per LP compared to North America and Western Europe. MENA has two quarters when the average peaked above $50 million, while the other two regions haven’t fallen below $65 million in nearly 15 years.
Investment style plays a large role here, as MENA is driven mainly by venture capital and growth funds. MENA has had a focus on modernization in this timeframe—highlighted currently by their partnership with OpenAI—a mandate that lends itself to the VC investment model. And as VC funds are typically smaller and more agile than their buyout counterparts, it makes sense that the average commitment in these funds would also follow suit.
One interesting observation is that the most tumultuous economic periods in this timeframe, the Great Financial Crisis and initial COVID market of March 2020, don’t have as outsized an impact here as on many of our other charts. One explanation is that while overall private investments plunged during those times, LPs were selecting fewer partner funds. As the pool of money shrank, so too did the number of investments, leveling the average commitment sizes to roughly their normal trendlines through those rocky years.
The MENA market has experienced considerable growth over the past two decades. Over time, the region’s continued growth and maturation may mean more space for other investment styles such as buyout, which could increase the average commitment size. Given the number of buyout funds raised by vintage in the region holding steady in recent years, we could start to see a shift in the latter half of the decade.
Another factor to note here is that our dataset is pulled mainly through North American LPs. Adding this filter to our view, it would also follow that as these LPs diversify and add a larger allocation to other geographies, we could see an increase in the average commitments as well. It’s something to monitor as the decade progresses.
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