Private markets are now a core pillar of institutional portfolios globally, offering long-duration exposure, diversification benefits, and access to real-economy cash flows. Across private equity, private credit, infrastructure, and real assets, institutional allocators increasingly rely on private markets to meet long-term return and portfolio construction objectives.

At the same time, demand for Shariah-compliant investment solutions continues to scale across the GCC and Southeast Asia and is increasingly visible within global institutional and private wealth channels. This demand is no longer confined to niche mandates or specialist investors. It represents an increasingly investable capital base, one that global institutions can serve through thoughtful structuring, governance, and product design.

This convergence is not automatic, but it is real.

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Market Size and Trajectory: A Platform-Ready Capital Base

The scale and growth trajectory of Islamic finance provide important context for private markets.

According to the 2025 LSEG–ICD Islamic Finance Development Indicator, global Islamic finance assets reached approximately US$6tn¹ in 2024, reflecting robust growth of about 21% from the prior year. Looking further ahead, industry forecasts suggest Islamic finance assets could approach US$9.7 tn¹ by 2029, underscoring the expanding relevance of Shariah-compliant finance across global capital markets.

What matters for private markets is less the precise base year and more the direction of travel: these asset pools are increasingly institutional, concentrated among large allocators, and structurally capable of supporting private market allocations, provided implementation is genuinely Shariah-compliant rather than assumed to be so.

Islamic Finance Assets Growth (US$billion, 2018-2024)

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Why Private Markets Align Naturally with Shariah Principles

Many of the defining characteristics of private markets are already closely aligned with Shariah investment principles:

• Real-economy focus:
  Private equity, private credit, infrastructure, and real assets are typically anchored in tangible businesses and cash-flow-generating assets.
• Disciplined use of leverage:
  Shariah frameworks impose constraints on leverage and speculative financing, reinforcing capital structures that prioritise sustainability and downside protection.
• Long-term ownership and partnership:
  Private markets emphasise value creation through governance, operational improvement, and strategic growth, concepts that align naturally with Shariah’s emphasis on partnership and shared economic outcomes.
• Limited speculative activity:
  The illiquid and long-duration nature of private markets reduces short-term trading behaviour and encourages fundamental value assessment.

As a result, many private market strategies require adaptation rather than reinvention to meet Shariah requirements.

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Unlocking New Capital Pools: Market Evidence

Private Markets Are Large and Still Growing

Private markets continue to operate at meaningful scale, with private equity activity regaining momentum through 2025. In Q3 2025 alone, global private equity deal value reached US$522bn, the strongest quarterly level since late 2021. On a full-year basis, cumulative global deal value across buyout, venture, and growth strategies is estimated at around US$1.4tn, also the strongest annual total since 2021.²

Islamic Capital Markets Show Institutional Depth

Beyond headline asset growth, the 2025 LSEG–ICD Islamic Finance Development Indicator (IFDI) points to increasing institutional depth within Islamic capital markets, an important consideration for global private market allocators.

• Capital-markets maturity:
  The IFDI 2025 highlights that global sukuk outstanding exceeded US$1tn in 2024¹, reflecting a deep and repeat-issuer capital markets segment capable of supporting large-scale allocations, structured issuance, and long-dated financing needs.
• Ecosystem breadth and global footprint:
  The Indicator covers Islamic finance activity across more than 140 jurisdictions ¹, underscoring that Shariah-compliant finance is no longer regionally concentrated but embedded across global financial systems, regulators, and market infrastructures.

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Implementation: Integration, Not Reinvention

The most credible institutional approach is to treat Shariah-compliant private markets as:

• a product and governance overlay on existing private market platforms, and
• a structuring capability for strategies that are not compliant out of the box, particularly private credit and leveraged buyouts.

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Core Shariah Constraints (Institutional Framing)

Shariah-compliant investing typically requires avoiding riba (interest), excessive uncertainty, and gambling/speculation, alongside sector exclusions and continuous compliance monitoring. In private markets, this translates into:

• Generating returns through permissible contractual forms rather than interest
• Managing leverage and instrument mechanics at portfolio-company level
• Implementing formal Shariah governance across the full investment lifecycle

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Practical Implementation Checklist

For banks and asset managers, this typically involves:

1. Defining the target private market sleeve

• Buyout, growth, venture
• Infrastructure and real assets
• Private credit (direct lending, asset-backed, opportunistic)

2. Selecting the compliance architecture

• Internal vs external Shariah supervisory boards
• Pre-trade approvals and post-investment monitoring
• Clear reporting and audit cadence

3. Designing the structuring toolkit

• Documented permissible financing structures
• Tradability and transferability considerations
• Alignment of legal documentation and cashflow mechanics

4. Portfolio construction and risk alignment

• Alignment of portfolio construction with Shariah screening criteria and zakat return implications
• Explicit leverage, compliance constraints

5. Distribution and client readiness

• Mapping demand across GCC and Southeast Asia institutions, family offices, and private banks
• Product education and suitability frameworks

A Bridge to the Future of Private Markets

Private markets will increasingly compete on access to long-duration, resilient capital. Shariah-compliant investors represent a growing and institutionalising segment, large enough to matter, and structured enough to engage, provided institutions address friction points honestly and build real solutions.

The convergence between conventional private markets and Shariah-compliant capital is not automatic, but it is highly plausible, and investable, when institutions build the bridge deliberately.

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Author

Saad Adada, CFA

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^Sources:

^{1-       https://www.lseg.com/content/dam/data-analytics/en_us/documents/reports/lseg-islamic-finance-development-indicator-2025.pdf}

^{2-       https://pitchbook.com/news/reports/q3-2025-global-pe-first-look}