Description:

The Securities and Exchange Commission of Pakistan (SECP) has issued a Diagnostic Review of Pakistan"s Private Funds Industry, which provides a comprehensive synopsis as well as recommendations for key fiscal and regulatory reforms needed for a thriving PF industry that can stimulate economic activity, catalyse job creation, and increase government revenues.

The report assesses the country"s Private Funds (PF) sector, which includes both Private Equity and Venture Capital Funds (PE&VC Funds) and Alternative Funds.

The report also includes policy suggestions for a multifaceted reform plan in order to enable a vibrant and galvanised PF sector. Aside from properly defining private funds in tax laws and allowing all private fund categories to benefit from pass-through status and capital gains tax deductions, the report outlines some fundamental steps that can expand the investment company pool and unify government projects for the sector.

According to the report, the total size of Venture Capital and Private Equity Funds as of June 30, 2022, reached Rs. 10.99 billion, up from Rs. 6.69 billion on June 30, 2021, representing a year-on-year growth of 64%. The number of PE&VC funds, however, remained constant at five.

On the operational side, the study provides answers to pertinent questions, allowing the launch of private donations in the alternate legal structure of Limited Liability Partnerships as opposed to the long-established trust structure. It also suggests reconsidering the roles of trustee and custodian, given that these funds are only for sophisticated institutions and investors.

SECP Chairman Aamir Khan stated in a statement attached to the report that with youth constituting more than 60% of the population in Pakistan, the potential of the PF industry must be practically tapped and fully explored in order to encourage innovation and knowledge-based thoughts into commercial production.

The diagnostic review report is the result of in-depth interviews with private fund management firms, major figures in the startup industry, and a variety of both public and private stakeholders.