The Securities and Exchange Commission of Pakistan (SECP) has made significant progress with the registration of seven new Private Funds in the year 2022. SECP has been successful in registering two Venture Capital (VC) funds, four Private Equity and Venture Capital (PE&VC) funds and the country’s first alternative fund in the year 2022.

This is a significant development since for the past many years there were only five Private Funds operating in the country under the SECP. SECP has been continuously reforming its rules and regulations for the past three years resulting in a significant increase in the number of firms registering with the regulatory body.

The number of PFMCs has increased from four to ten in the last three years making the PF industry under the SECP really competitive. The new funds, worth approximately PKR13.6 billion are expected to be launched within the financial year ending on June 30, 2023. 

Following the launch of seven new funds, the cumulative asset size of PF sector is expected to increase from PKR12.287 billion to PKR25.8 billion, as of September 30, 2022, indicating a growth of 110%. The SECP has conducted a ‘Diagnostic Review of Pakistan’s Private Funds Industry’ and has recommended measures to revitalize the sector after which growth is witnessed in the PF industry.  

Meanwhile, the Federal Board of Revenue (FBR) on the recommendation of SECP has also exempted the PE&VC funds from income tax. In addition, the State Bank of Pakistan has also issued a clarification regarding its Prudential Regulations for Corporate/Commercial Banking, explicitly allowing banks to participate in PF units. 

The SECP has also allowed insurance-unit linked funds and equity sub-funds of pension funds to invest up to 5% of net-assets in PF units.  Implementation of several key recommendations of the diagnostic study has led to a record growth in new PF registrations and is expected to direct private capital to the sector.

The PF industry has a potential to contribute significantly in energizing the economic activity through providing non-traditional funding sources and managerial expertise to start-ups, SMEs, and financially troubled listed entities, generating jobs and increasing government revenues.  The SECP is actively working to implement remaining diagnostic review recommendations to further rejuvenate the PF industry of Pakistan.

Credit : Independent News Pakistan-WealthPk