CMA issues draft instructions on Simplified Investment Funds

Background

On 7 October 2025, the Capital Market Authority (CMA) released draft instructions on Simplified Investment Funds (Draft) for a 30-day consultation period ending 6 November 2025. This initiative forms part of the CMA’s strategy to deepen and internationalise the Saudi capital market, complementing the recent draft of the Offshore Securities Business License (OSBL) framework. These reforms aim to attract institutional investors, introduce more flexible fund structures, and align Saudi Arabia with global best practice in asset management, in line with Saudi Vision 2030.

Key Features of Simplified Funds

• Eligible fund managers: Only Capital Market Institutions (CMIs) licensed to manage investments and operate funds, or CMIs holding an OSBL with the activity of investment management, may establish these funds.
• Target investors:
  • Funds managed by onshore CMIs (without OSBL), limited to the institutional clients (as defined by the CMA's glossary of defined terms).
  • Funds managed by OSBL holders, may be offered to non-resident foreigners, the Saudi government and its entities, local banks, CMIs and insurance companies.
• Fund establishment: A fund is constituted upon signing its Terms and Conditions (T&Cs) by the fund manager and initial unitholders. The T&Cs govern contractual arrangements, unit features, meeting rules, and liquidation processes.
• Custody requirement: Appointment of a licensed custodian remains the default position, but Simplified Funds structured as Special Purpose Entities (SPEs) are exempt.

The Draft introduces a regime that resembles the limited partnership (LP/GP) model. This is reflected in:

• Contractual freedom – fund managers and unitholders may determine key provisions, including unit classes, voting rights, unitholder meetings, and termination procedures.
• Delegation – fund managers may delegate management or operational responsibilities to third parties (local or foreign), provided they are appropriately licensed and subject to adequate regulatory supervision.
• Reduced costs – streamlined governance and SPE based exemptions are designed to make establishment and ongoing operation more cost-efficient.

Regulatory and Compliance Framework

While more flexible, Simplified Funds remain subject to a baseline regulatory framework:

• Disclosure and reporting: Annual audited financial statements (in line with Saudi standards) must be prepared and provided to unitholders on request.
• Record-keeping: Managers must maintain books, records, and a unitholder register in the Kingdom (delegation permitted).
• Conflicts of interest: To be managed and disclosed in accordance with the Capital Market Institutions Regulations and the Investment Funds Regulations.
• CMA oversight: Managers must notify the CMA before offering units, submit fund documents, and pay registration fees. The CMA retains authority to suspend or prohibit offerings if requirements are not met.

Restrictions

• No real estate: Simplified Funds may not be established as real estate funds or invest directly in real estate, unless managed by an OSBL holder.
• Eligible investors only: Secondary transfers of units are restricted to the same categories of eligible investors.
• Advertising: Promotion may only be directed to eligible investors.

Implications for Market Participants

For CMIs, the Draft offers a new product line with greater flexibility compared to traditional private funds, potentially lowering establishment costs and accelerating time-to-market.

Offshore managers with an OSBL (once it is offered) may find this a gateway product to attract non-resident and institutional capital into the Kingdom. For institutional investors, Simplified Funds provide access to alternative strategies within a regulated but lighter-touch framework.

There is great potential to use Simplified Funds as structuring tool.

Next Steps

The CMA consultation remains open until 6 November 2025. Market participants, particularly CMIs considering product diversification, or offshore institutions evaluating entry routes into Saudi Arabia, should assess how the proposed regime could affect their operations and opportunities.

Our Financial Services Regulatory team at Ashurst is actively engaging with these developments. We would be delighted to discuss how the Simplified Fund regime and the related OSBL reforms may impact your business, and how to best position for the regulatory changes ahead. Please reach out to us should if you wish to explore market entry routes – particularly through the OSBL, tailored implications or potential structuring options.

Other Authors: Rayan AlMadani, Associate; Majed Alsaggaf, Trainee Associate