PE sec­tor to con­tinue growth tra­jec­tory

The Sun (Malaysia) - - SUNBIZ -

KUALA LUMPUR: Malaysia’s pri­vate eq­uity (PE) sec­tor is poised to con­tinue its growth tra­jec­tory in view of the promis­ing value propo­si­tion the sec­tor of­fers, says the Se­cu­ri­ties Com­mis­sion (SC).

Its chair­man Tan Sri Ran­jit Ajit Singh said the PE sec­tor was an­tic­i­pated to con­sti­tute a pro­gres­sively sub­stan­tial com­po­nent of the cap­i­tal-rais­ing pipe­line for early- and growth-stage com­pa­nies.

“These young and ex­pand­ing busi­nesses typ­i­cally lack the ma­tu­rity, scale and track records re­quired to avail them­selves of tra­di­tional and es­tab­lished chan­nels of fund-rais­ing.

“With its op­er­a­tional ex­per­tise, net­work of con­tacts and com­mer­cial know-how as well as its in­vest­ment hori­zon that in­cen­tivised de­ci­sion-mak­ing for the longer term, PE is well-placed to ad­dress the fi­nanc­ing and growth needs of this rel­a­tively un­der­served seg­ment,” he said.

Ran­jit said this at the Pri­vate Eq­uity Fo­rum 2016 here yes­ter­day.

As at end-2015, the to­tal amount of com­mit­ted funds in Malaysia’s ven­ture cap­i­tal and pri­vate eq­uity sec­tor grew 15.2% year-on-year to RM7.15 bil­lion, more than double the size a decade ago.

Deal-mak­ing has also been on a steady de­cline since 2012, with RM365 mil­lion worth of in­vest­ments made by ven­ture cap­i­tal/pri­vate eq­uity firms in 2015.

Ran­jit also called on pri­vate sec­tor to con­sider and har­ness the po­ten­tial value of PE in com­ple­ment­ing their port­fo­lios.

In 2015, sovereign wealth funds, gov­ern­ment in­vest­ment com­pa­nies and agen­cies were the largest sources of cap­i­tal through their con­tri­bu­tion of 87.4% of ven­ture cap­i­tal and pri­vate eq­uity fund­ing, he said.

Ran­jit said de­mand for pri­vate eq­uity might also man­i­fest it­self from the per­spec­tive of in­vestors.

He said the Malaysian cap­i­tal mar­ket fea­tured deep pools of in­sti­tu­tional cap­i­tal in ex­cess of RM1.5 tril­lion, which was rapidly de­vel­op­ing at a five-year com­pound an­nual growth rate of 11%, of­fer­ing good po­ten­tial for ex­pan­sion of al­lo­ca­tion to the PE as­set class.

“Adding fur­ther to the prospec­tive source of cap­i­tal is Malaysia’s grow­ing class of af­flu­ent and high net worth in­di­vid­u­als, num­bered at an es­ti­mated 475,000 and are es­ti­mated col­lec­tively worth more than RM1 tril­lion,” he said.

He said Malaysia was strate­gi­cally po­si­tioned to be a cen­tre of Is­lamic PE ac­tiv­i­ties given the na­ture and struc­ture of PE were con­sis­tent with syariah-com­pli­ant con­cepts of risk-shar­ing and par­tic­i­pa­tion in real busi­ness ac­tiv­ity. – Ber­nama

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