Blog Capital Is Flowing Abroad — Execution Still Determines Who Wins

Capital Is Flowing Abroad — Execution Still Determines Who Wins

December 8, 2025

Read Time: 7 minutes

Authors: Rochelle Glazman

Finance & Markets

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The S&P 500 has recovered from its recent correction and continues to show strength. Private equity has $1.6 trillion in dry powder.ⁱ Both milestones highlight developed economies, yet they distract from other signals from emerging markets, which are wide awake and ready to challenge wealthier nations.

In 2025, performance in emerging regional markets has been staggering. Global M&A has notably outpaced that of the U.S.ⁱⁱ While American deal flow declined by 11% as of March, acquisition activity jumped by 137% in the Middle East and by 39% in Asia. In the first quarter of 2025, the Asia-Pacific region overtook the Americas in IPO volume, while IPO activity in the Middle East more than doubled — driven largely by Riyadh and Dubai.ⁱⁱⁱ

Meanwhile, Wall Street is not alone in losing some of its deal flow to other markets. London, long accustomed to sharing dominance with New York in the IPO market, has also seen a decline.^iv

What’s driving the shift from the traditional powerhouse regions to new frontiers?

The three D’s — data, deregulation, and diversification — explain much of the change, but the full explanation goes well beyond them. The chase for new assets under management, higher returns on capital, and the opportunity to influence often overlooked sovereign nations all spark competition in new markets.

To generate alpha, managers need more than the prowess to pick undervalued securities. Success increasingly hinges on local relationships and cultural fluency — factors that determine who gets invited into the next round of deals. Firms with strong on-the-ground presence and innovative infrastructure are better equipped to navigate foreign markets and implement data-driven decisions that directly improve returns.

Beyond NY and London: the rise of newer financial hubs

Middle East

The Middle East is well known for its energy resources. Shifting priorities, though, have galvanized the region’s decision makers to broaden their appeal. International Monetary Fund data shows that Persian Gulf economies have attracted substantial foreign direct investment inflows post-pandemic, with a growing emphasis on such nonoil sectors as manufacturing, transport, storage, and wholesale/retail trade.^v Other sources note that the United Arab Emirates leads the world in FDI as a proportion of economic activity.^vi

Saudi Arabia has earmarked more than a trillion dollars for real estate and infrastructure ^vii and roughly $75 billion for renewable energy diversification,^viii while an even more aggressive forecast predicts up to $100 billion for artificial intelligence development by 2030.^ix This underscores a policy-driven pivot toward a diverse, future-focused domestic economy.

The race for influence has already begun. Institutional investors gravitate toward regions with accelerating growth, and the founder of the world’s largest hedge fund is setting up shop in the Middle East to capitalize on rising corporate and household wealth. Ray Dalio’s new family office in Riyadh ^x underscores the pursuit of AUM and influence, as Saudi Arabia’s financial ambitions create attractive opportunities.

Similarly, Fortress Investment Group has built a stronghold in Abu Dhabi with its new $1 billion strategic partnership with the Mubadala Investment Company.^xi In line with this theme, co-CEO and managing partner Joshua Pack said, “Our global growth strategy is rooted in performance, alignment, and solutions — and this expansion exemplifies that.”

Still, challenges persist. Heavy compliance on state-led investment programs, geopolitical volatility, and uneven regulatory frameworks remain risks that global investors must weigh alongside the region’s growth story.

Europe

Despite years of inflation, uncertain monetary policy, and heavy regulation, the clouds are beginning to clear for Europe.

PE firms see increased opportunities, favorable valuations, healthy liquidity, and relatively better client flows as a compelling mix of factors drive greater focus on Europe over the U.S. As evidence, European deal multiples hit a record of 12.1x cash earnings in 2025,^xii as investors pay a premium for high-quality assets. Exit counts and deal values are also on the rise. While North American client flows dropped 34%, redemptions stayed flat in Europe as clients largely remained invested.

Still, persistent regulatory headwinds, political fragmentation, and slower structural reforms remain constraints that investors must navigate alongside the region’s recovery.

Unsurprisingly, megafunds are capitalizing on the opportunity. Carlyle recently launched a semi-liquid European Private Credit strategy that provides clients with bespoke solutions across its $188 billion Global Credit platform.^xiii Similarly, Brookfield Asset Management opened a new office hub in Paris, focusing on renewable energy, digital infrastructure, and real estate, citing “the high conviction we hold in the long-term opportunity ahead for Brookfield in France.”^xiv

Finally, Blackstone is expanding its European private wealth business.^xv

“There's a growing change in Europe,” according to Rashmi Madan, the firm’s EMEA head, who further noted that he expects this momentum will enhance the firm’s performance and strategic position.

To sum up, many of the largest and most respected investment firms are building their European infrastructure in anticipation of higher returns, AUM, and capital flows.

Asia

While the United States remains home to many of the world’s largest and most successful technology companies, Asia’s share of global patent applications rose from 58.4% in 2013 to 68.7% in 2023,^xvi reflecting the region’s increasing focus on research and development. Moreover, while companies like Microsoft, Google, FedEx, Rolls-Royce, Mead Johnson, TikTok, and Shein call Singapore their regional home, the tsunami of talent has real estate management company Knight Frank projecting that offshoring will more than double by 2032, fueling an additional 4.7 million to 5 million square meters of office space demand per year over the next three years.^xvii

Thus, while Europe and the Middle East’s rise as financial hubs have been primarily driven by institutions pursuing AUM, performance, and influence, Asia has leveraged innovation to pitch higher growth rates, long-term returns, and more efficient avenues for capital deployment.

Uneven regulatory environments, geopolitical tensions, and currency volatility remain real challenges that investors must weigh against Asia’s innovation-led growth story.

What sets winning firms apart?

To gain mind share as well as alpha across new markets, firms should adopt strategies that foster long-term growth. Success requires planning, process, and execution. To drive AUM, leaders should strategically target regions with unique prospects, businesses, resources, and infrastructure. The Middle East, Asia, and Europe are conduits to global trade, logistics, and energy. Growth across digital, health, and ESG sectors has also added to their appeal. The result is attractive assets and valuations that support long-term alpha.

Return outperformance for funds in emerging markets has also proven to be a function of exploiting inefficiencies like regional differences in currency, tax, government, and regulatory policies. Sources of alpha include:

Partnering with governments and local firms to benefit from favorable tax rates and investor-friendly governance
Lower disclosure/reporting standards in emerging markets reduce red tape and allow firms to move faster on deals
Exploiting currency and capital control differentials allow for carry trades and to strategically offshore/onshore manufacturing

Circling back, winning is about more than just effective models and accurate financial forecasts. Global investors expect a physical presence, and relationship-driven markets like the Middle East reward onsite commitment.

Fortress understands these dynamics and recognizes that remote collaboration doesn’t foster effective engagement. Local teams better implement deal sourcing, co-investment opportunities, and manager selection, and enhance compliance, client service, and distribution. The result? Stronger competitive advantage.

Strategic implications for financial firms

As firms embrace a localized approach to locating investment opportunities, they discover that there is more work to be done. A dedicated team is handcuffed if it lacks the tools to effectively train staff and retain customers. This makes infrastructure investments essential to develop technological moats that insulate firms from competition.

Asset managers cited reliance on data and analytics as the top trend disrupting the industry over the next three to five years, while integrating data sources and improving transparency was labeled a top priority over the next 24 months.^xviii

However, 80% of asset managers said their biggest barrier was the ability to obtain reliable, quality, real-time data. Consequently, many firms lack the in-house infrastructure to succeed abroad and are increasingly focused on outsourcing to fill the gap.

More than half of global firms already outsource their operations, while another 26% to 29% plan to use external service providers for data management infrastructure and analytics, respectively.

The future of global finance is polycentric

The emergence of new financial hubs in the Middle East, Asia, and Europe does not signal the death of New York and London. Rather, the once concentrated capital market structure is becoming more fragmented, and the traditional bastions of capital formation could still thrive by accepting this new reality.

Yet, presence alone does not ensure victory for firms playing abroad. The firms that move first and move most decisively to spot emerging trends, build the necessary infrastructure, and establish meaningful local relationships, will gain long-term advantages and become the new anchors of trust in these growing regions.

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Authored By

Rochelle Glazman

Rochelle is responsible for enabling go-to-market and growth strategies across sales, marketing, product, and client engagement. Before taking on this role, Rochelle was a Senior Pre-Sales Consultant, engaging with clients and prospects across the financial services industry. Prior to joining Arcesium, Rochelle spent over five years at BlackRock Aladdin servicing institutional asset managers and leading several implementation projects across North and South America. She graduated from Vanderbilt University with a degree in economics.

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Sources:

[i] EY, 2025. https://www.ey.com/en_gl/insights/private-equity/pulse

[ii] Global Finance, 2025. https://gfmag.com/award/worlds-best-investment-banks-2025-introduction/

[iii] EY, 2025. https://www.ey.com/content/dam/ey-unified-site/ey-com/en-gl/insights/ipo/documents/ey-gl-global-ipo-trends-report-q1-04-2025.pdf

[iv] EY, 2025. https://www.ey.com/en_uk/newsroom/2025/04/subdued-q1-for-uk-ipos-with-just-five-new-listings

[v] IMF, 2025. https://www.imf.org/en/publications/reo/meca/issues/2025/04/24/regional-economic-outlook-middle-east-central-asia-april-2025

[vi] FDI Intelligence, 2024. https://www.fdiintelligence.com/content/6ea0c454-9cf9-5b3c-8174-8f7d4a5bc203...%20Costa%20Rica,date%20GDP%20and%20FDI%20figures

[vii] BNN Bloomberg, 2025. https://www.bnnbloomberg.ca/

[viii] Renewable Energy Magazine, 2025. https://www.renewableenergymagazine.com/panorama/middle-east-on-course-to-reach-75-20240917

[ix] BNN Bloomberg, 2025. https://www.bnnbloomberg.ca/