SECP introduces ‘Angel Fund’ for startups in Pakistan

The Securities and Exchange Commission of Pakistan (SECP) has officially introduced the “Angel Fund”, a new category of Venture Capital Fund designed to invest primarily in unlisted securities and financial assets of early-stage startup companies.

This development comes following SECP’s notification issued on Monday to amend the Private Fund Regulations, 2015.

What is the Angel Fund?

According to SECP, the Angel Fund is a sub-category of Venture Capital Fund, structured as a closed-end fund, which focuses on financing early-stage startups. Unlike hedge funds, the Angel Fund is specifically designed to channel investment into companies that are still in their initial stages of development.

Who Qualifies as an Eligible Investor?

SECP’s revised framework defines “Eligible Investor” under the Angel Fund as:

• An individual earning a minimum annual income of Rs. 5 million in the preceding financial year, or having net assets of at least Rs. 15 million (excluding personal residence).
• The individual must also provide a formal declaration to the Private Fund Management Company confirming that they understand the risks involved in investing in a Private Fund.
• Additionally, qualified institutional buyers also fall under the Eligible Investor category.

Key Definitions Under the Revised Regulations

The amendments provide clarity on various fund categories and terms:

• Financial Close: Refers to the stage when all investment and financing arrangements are finalized, funds are received, and active investment begins in accordance with the policy outlined in the constitutive documents.
• Fund of Funds: A sub-category of Private Fund, which may be open-ended or closed-ended, that invests primarily in units of other Private Funds.
• Hedge Fund: A Private Fund (open-end or closed-end) that employs diverse trading strategies and primarily invests and trades in portfolio securities and other financial assets.
• Impact Fund: A closed-end Private Fund investing primarily in unlisted securities or financial assets (excluding derivatives) of companies that focus on environmental, social, and governance (ESG) issues.
• Infrastructure Fund: A closed-end Private Fund that invests primarily in unlisted securities or financial assets of companies engaged in or created for infrastructure projects such as transportation, utilities, and energy.

Significance of the Angel Fund

By introducing the Angel Fund, SECP aims to strengthen Pakistan’s startup ecosystem, offering early-stage companies greater access to much-needed financing. At the same time, the framework ensures that only qualified and risk-aware investors participate, thereby balancing opportunity with investor protection.