The Banking Executive Magazine - May 2026 Issue - New

Capital with Purpose of industry-wide norms that balance openness with prudence. STRENGTHENING ALLIANCES THROUGH CAPITAL One of the most compelling attrib- utes of the FoF model is its capacity to operate across borders. In a world where economic and technological ecosystems are increasingly intercon- nected, national approaches alone may prove insufficient. FoFs offer a practical mechanism for aligning investment strategies among allied countries. By pooling capital and coordinating priorities, govern- ments can support shared objectives while distributing both risk and re- ward. This is particularly relevant in areas where the scale of investment required exceeds the capacity of any single country. Multilateral initiatives have already begun to demonstrate this potential. By investing in funds that operate across multiple jurisdictions, these platforms facilitate the exchange of knowledge, the development of complementary capabilities, and the creation of more resilient supply chains. For the Arab region, where eco- nomic integration remains an ongo- ing objective, such approaches hold significant promise. Coordinated in- vestment strategies could help bridge gaps between markets, support the development of regional champions, and enhance collective competitive- ness. BEYOND INNOVATION: THE IMPERATIVE OF SCALE While much of the discussion around FoFs has focused on early- stage innovation, this represents only part of the equation. The ability to develop new technologies is impor- tant, but it is equally critical to retain control over their production and distribution. Recent geopolitical developments have underscored the risks associ- ated with fragmented supply chains. Even where countries possess strong innovation capabilities, reliance on external suppliers for key compo- nents can limit their strategic auton- omy. For this reason, FoFs should be con- sidered as part of a broader frame- work that includes support for manufacturing and supply chain development. This may involve backing funds that specialize in scaling industrial capacity, financing infrastructure, or enabling the com- mercialization of advanced tech- nologies. Such efforts must be aligned with other policy instruments. Public pro- curement, for example, can provide stable demand for emerging indus- tries. Export controls can protect sen- sitive technologies, while targeted incentives can encourage investment in priority areas. The objective is not to replace mar- ket mechanisms, but to guide them in ways that reinforce long-term re- silience. IMPLICATIONS FOR THE ARAB FINANCIAL SECTOR For Arab economies, the evolving role of FoFs presents both an oppor- tunity and a responsibility. The re- gion is home to significant pools of capital, a growing base of entrepre- neurial talent, and an increasing focus on technological development. At the same time, it faces structural challenges related to diversification, employment, and integration into global value chains. Strategically designed FoFs could help address these challenges by channeling capital into sectors that align with national and regional pri- orities. They could also serve as plat- forms for collaboration among sovereign wealth funds, develop- ment finance institutions, and private investors. However, success will depend on careful execution. Without clear mandates, robust governance, and strong alignment between stakehold- ers, such initiatives risk falling short of their potential. A FORWARD-LOOKING PERSPEC- TIVE As the global economic landscape continues to evolve, the intersection of finance and strategy will become increasingly pronounced. Funds of funds, once viewed as technical in- struments within the venture capital ecosystem, are now emerging as tools with broader significance. Their effectiveness will ultimately be determined by the clarity of their purpose and the rigor of their design. When these elements are in place, FoFs can contribute to the develop- ment of innovation ecosystems that are both competitive and resilient. For Arab banks and financial leaders, the path forward is clear yet demand- ing. It requires embracing a more strategic approach to capital alloca- tion—one that goes beyond short- term returns and considers the long-term positioning of economies within a changing global order. Insti- tutions should actively participate in or partner with FoF structures that align with national priorities, advo- cate for transparent and disciplined governance frameworks, and support initiatives that strengthen regional collaboration. By doing so, they can play a pivotal role in shaping an eco- nomic future that is not only prosper- ous, but also secure and sustainable. the BANKING EXECUTIVE 24 ISSUE 209 MAY 2026