The Securities and Exchange Commission of Pakistan (SECP) has released a Diagnostic Review of Pakistan’s Private Funds Industry, providing a holistic synopsis and recommendations for key fiscal and regulatory reforms required for a vibrant PF industry that can spur economic activity, catalyze job creation and increase government revenues.
The report provides an overall assessment of the country’s Private Funds (PF) sector, which collectively refers to both Private Equity and Venture Capital Funds (PE&VC Funds) and Alternative Funds.
To enable a vibrant and galvanized PF sector, the report also provides policy recommendations for a multifaceted reform agenda. Apart from properly defining private funds in the tax laws and enabling all private fund categories to avail of pass-through status and capital gains tax exemptions, the report provides some basic steps that can augment the investor pool and unify government initiatives for the sector.
The report states the total size of Private Equity and Venture Capital Funds as of June 30, 2022, reached Rs. 10.99 billion as compared to Rs. 6.69 billion on June 30, 2021, registering a year-on-year growth of 64 percent. However, the number of PE&VC funds remained the same at five.
On the operational side, the study answers pertinent questions enabling the launch of private funds in the alternate legal structure of Limited Liability Partnership as compared to the long prevailing trust structure. It also recommends a relook into the role of trustee and custodian, considering that these funds target only sophisticated investors and institutions.
SECP Chairman Aamir Khan, in his statement attached to the report, said that considering more than 60 percent of the population comprises youth in Pakistan and to encourage innovation and knowledge-based ideas into commercial production, the potential of the PF industry requires to be practically tapped and fully explored.
The diagnostic review report is an outcome of extensive consultations with private fund management companies, key players in the startup space, and a diverse set of both public and private stakeholders.