SECP Introduces ‘Angel Fund’ for Start-up Investments

The Securities and Exchange Commission of Pakistan (SECP) has launched a fresh category of Venture Capital Fund known as the “Angel Fund,” designed to invest predominantly in the unlisted securities or financial holdings of budding, early-stage start-up enterprises.

The SECP officially released a notification on Monday, amending the Private Fund Regulations of 2015 to incorporate this new category.

According to the SECP, an “Angel Fund” is defined as a specific sub-category within Venture Capital Funds. It operates under a closed-end structure and focuses its investments on unlisted securities or financial assets belonging to early-stage start-ups, excluding Hedge Funds.

An “Eligible Investor” includes individuals with a minimum income of Rs. 5 million in the previous fiscal year, or those possessing net assets of at least Rs. 15 million (excluding the value of their primary residence). Such investors must also provide a declaration to the Private Fund Management Company affirming their understanding of the investment risks associated with Private Funds, as well as qualified institutional buyers.

Under the updated regulations, “Financial Close” signifies the point at which all investment and funding arrangements are finalized, funds are secured, and the active investment process from the Private Fund commences, adhering to the investment policy outlined in the constitutive documents.

The term “Fund of Funds” refers to a sub-category of Private Fund, structured as either close-ended or open-ended, that primarily invests in units of other Private Funds.

A “Hedge Fund” is defined as a Private Fund, whether open-ended or close-ended, employing varied trading strategies and primarily investing and trading in Portfolio Securities and other financial Assets. An “Impact Fund” is a sub-category of a Private Fund with a close-ended structure, investing mainly in Unlisted Securities or financial assets (excluding derivatives) of socially responsible companies focused on environmental, social, and governance (ESG) matters.

The SECP further clarified that an “Infrastructure Fund” is a sub-category of Private Fund with a close-ended structure. It primarily invests in Unlisted Securities or financial assets other than derivatives of companies involved in operating, developing, or holding infrastructure projects related to transportation, utilities, energy, and similar sectors.