backOn March 2, 2026, the Capital Market Authority (CMA) of Saudi Arabia issued the Instructions of Simplified Investment Funds (the “Instructions”), marking a significant milestone in the Kingdom’s efforts to modernize its asset management framework. Building on the draft instructions released for public consultation in October 2025, the final Instructions establish a streamlined regulatory regime designed to attract institutional capital by offering greater flexibility, reduced administrative burdens and enhanced contractual freedom for fund managers and investors.
Historically, private investment funds in Saudi Arabia could be offered to Institutional Clients (i.e. Saudi Arabian government, sovereign entities, and companies with a net worth of at least SAR 50 million); to Qualified Clients(i.e. high net worth individuals and companies with a net worth between SAR 10 million and SAR 50 million); and, subject to specific regulatory safeguards, to retail clients. This broad investor eligibility framework resulted in the CMA applying a relatively strict supervisory approach to private funds. As a consequence, many contractual provisions, governance mechanics and manager–investor arrangements became heavily standardized and relatively restrictive, leaving fund managers with limited flexibility when designing bespoke private fund terms.
The new Instructions represent a recalibration of that approach. The CMA has now clarified that where a fund manager raises capital exclusively from Institutional Clients a differentiated regulatory framework may apply. This allows for greater contractual discretion, more flexible fund terms and a simplified compliance burden. In effect, the CMA is signalling that institutional only funds do not require the same level of regulatory prescriptiveness that previously applied when retail investors could participate.
According to the CMA, the Instructions aim to enhance the regulatory framework applicable to private funds and align local structures and terms with global market practices. The framework draws on international models used for alternative investment funds and is expected to support the growth of assets under management across private equity, venture capital, real estate, infrastructure and private credit strategies.
Key Flexibilities Introduced Under the Instructions
Flexibility in Form of Offering Document
The Instructions introduce significant flexibility in the preparation of a fund’s offering document. Fund managers are no longer required to follow the prescribed Terms and Conditions (the main offering document of a Saudi domiciled fund) template under the Investment Funds Regulations (IFR), which historically served as the primary offering document for Saudi funds. Instead, the Instructions require only that certain minimum disclosures be included, such as key subscription terms, capital information, unit value, establishment requirements, issuance details, fund manager information, fund classification, investment strategy and objectives, roles and responsibilities of all parties, fee arrangements and risk factors.
In practice, this shift provides fund managers with greater freedom to tailor the Terms and Conditions to commercial and operational needs, provided that the mandatory elements are addressed. Previously, many provisions such as fund manager removal mechanics, fund termination, investor reporting, voting rights, governance terms and economic provisions had to follow the IFR wording without deviation. This constraint has now been relaxed for institutional only funds.
For Institutional Clients, this flexibility represents a significant development compared to the CMA’s earlier approach, where many contractual terms were required to match the IFR exactly, even where customised or investor friendly provisions would have been appropriate. Under the new Instructions, Institutional Clients have more flexibility negotiating terms typically found in international private fund documentation and request manager accommodations that were previously restricted. As a result, both managers and Institutional Clients now have greater scope to design fund documentation that aligns with global market practice while remaining compliant with the CMA’s minimum content requirements.
Custody Requirements
Under the CMA framework, investment funds are generally required to appoint an independent custodian licensed by the CMA. The Instructions introduce two important exemptions. Funds established as a Special Purpose Entity are exempt from the requirement to appoint a custodian, and feeder funds are exempt from the requirement that the custodian be independent. These exemptions reduce operational complexity and, in practical terms, simplify fund formation, align the framework more closely with international structuring practices and lessen the administrative and custody related cost burden on funds.
Offering Process
Historically, the CMA required a minimum 15 business day review period for fund submissions, which prevented funds from launching sooner and often extended timelines where the CMA issued comments. Under the new regulatory framework, this mandatory 15 day review period has been eliminated. In practice, this allows funds to launch in fewer than 15 business days, provided the CMA is satisfied with the submission and any comments are addressed promptly.
When combined with the introduction of shorter form offering documents and the relaxation of custodian appointment requirements, these changes materially shorten the overall go to market timeline for new fund launches.
Our View
The issuance of the final Instructions represents a significant advancement in Saudi Arabia’s regulatory framework for investment funds. By introducing a more flexible, efficient and commercially oriented structure that reduces establishment and ongoing costs and allows greater contractual freedom, the CMA has taken an important step toward aligning the Kingdom’s asset management sector with international standards. These Instructions are also expected to serve as a foundation for further regulatory developments in the same direction.
As the market adapts to this new regime, Institutional Clients may increasingly encourage fund managers to update fund documents, streamline or terminate custody arrangements where appropriate and negotiate more bespoke terms relating to removal rights, termination mechanics, voting thresholds and reporting obligations. Global asset managers entering the Saudi market should consider how the new framework affects the drafting of fund documents, the CMA submission process and, in circumstances where a Saudi fund is launched as part of a broader regional strategy, the alignment of Saudi fund terms with offering documents used for other foreign vehicles within that structure. Local managers should also prepare for Institutional Clients to request terms that depart from the more prescriptive requirements they are accustomed to under the IFR, including greater flexibility around governance provisions, economic arrangements, investor protections and reporting standards.
Despite the increased flexibility, fund managers and Institutional Clients should seek legal advice when navigating matters that have historically attracted close CMA scrutiny. These include the use of different unit classes, economic arrangements including clawback and giveback mechanisms, default and enforcement provisions, governance frameworks and other commercial and structural terms that may require detailed analysis. It is also important for managers and investors to engage advisors who understand the Shariah and tax implications of these structures, as these considerations remain fundamental to the design and operation of Saudi funds.
These reforms represent a meaningful step toward further modernizing the Saudi funds landscape, allowing for more freedom of contract and streamlining the establishment and launch processes. CMA regulated funds are already attractive vehicles, and the market may now be better positioned to accommodate more sophisticated structures. As the CMA continues to balance growth of private markets with investor protection, this new framework is received as a positive development.
About King & Spalding’s Investment Management Practice in the Middle East
In the Middle East, King & Spalding has a dedicated investment management and funds practice operating across Riyadh, Dubai and Abu Dhabi. We are the only international law firm that has maintained a specialist Saudi Arabian funds team since 2008. Our work spans the full spectrum of fund formation across all asset classes, including private equity, venture capital, real estate, infrastructure and private credit. We also advise on financial services regulatory matters and disputes involving investment funds, giving us insight not only into the regulatory requirements but also into how key terms are interpreted and tested in contentious and enforcement scenarios.