Leading global fund managers and private equity firms are quietly lining up for a chance to manage another new and significant pool of money in the Middle East – an endowment for a new Saudi university with at least $10bn in assets.

The King Abdullah University of Science & Technology will not open until 2009 but it is already holding talks on its endowment with fund managers such as BlackRock and private equity firms including Bain Capital, people familiar with the matter say.

The university has received $10bn for its endowment from King Abdullah, which would make it the sixth biggest university endowment in the world, said a university spokesman based in Washington.

People familiar with the endowment negotiations say they have been told the fund could grow to as much as $25bn, which would make it the world’s second biggest university endowment after Harvard’s $35bn nest egg.

The endowment would be one of several significant Saudi investment bodies. So far, the Saudi approach has been to refrain from giving any one arm too much money in the hope of maintaining a low profile and preventing a foreign backlash, bankers say.

“The Saudis under-represent both the amount of their reserves and the investments they make overseas,” said the head of the Dubai branch of one large Wall Street firm. “The last thing the Saudis want is to attract attention.”

The low-key approach was underscored when the kingdom recently set up a sovereign wealth fund with only $5.3bn in initial capital. The money – which will be invested through the Public Investment Fund – is already being allocated to managers in London, Switzerland and the US.

Well before that fund was established, banks with big asset management arms, including Goldman Sachs and UBS, received substantial sums to invest on behalf of the Saudi Arabian Monetary Authority, the Saudi central bank. Sama has official reserves of $330bn but many analysts put the actual number far higher.

Sama’s resources are a small part of the total wealth of the kingdom. Much of its oil revenues end up with individual members of the royal family one member of which provided much of the recent rescue finance package for UBS, in an echo of Saudi Prince Alaweed’s investment in Citicorp in the early 1990s.

Money from endowments is considered particularly desirable by fund managers because universities have such a long-term investment focus. Some sovereign funds in the Gulf, such as the Kuwait Investment Authority, have adopted the endowments of leading universities such as Harvard and Yale as their role models.

Saudi Arabia has made education a priority, allocating 25 per cent of its budget to such purposes. The new university will be co-ed and has an aggressive scholarship programme.