There is a thriving investment funds market on the Tadawul, supported by specialist CMA regulations that cover public, private, real estate, and foreign investments, and which were revamped in 2016 to strengthen the governance of funds and attract institutional investors. Additionally, the Tadawul has specific regulations for Exchange Traded Funds (index tracking funds whose units are traded on the exchange). The updated regulations expressly provide for foreign investment in Saudi-listed funds, except where the manager of the fund has obtained a formal exemption from the CMA. Foreign unitholders are not permitted, however, in private real estate funds investing in the holy cities of Makkah and Medina due to separate legal restrictions.
The role of the fund manager is crucial in Saudi Arabian investment funds, as such funds are constituted through a contract between the unitholders and the fund manager based on the fund terms and conditions.