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Pakistan Introduces New Category of Mutual Funds for Infrastructure Development

Strategic Insights

— 2 min read

The Securities and Exchange Commission of Pakistan (SECP) has introduced a new category of mutual funds titled 'Infrastructure Schemes' to strengthen the role of capital markets in channelling long-term savings into infrastructure development. This move represents a significant step towards bridging Pakistan's infrastructure financing gap, estimated to be around $15 billion annually. Current infrastructure spending remains significantly below international benchmarks, amounting to just 2.1 percent of GDP compared to the global standard of 8-10 percent.

Key Takeaways:

  • The SECP has introduced a new category of mutual funds titled 'Infrastructure Schemes' to channel long-term savings into infrastructure development.
  • The initiative aims to bridge Pakistan's infrastructure financing gap, estimated to be around $15 billion annually.
  • Current infrastructure spending in Pakistan is significantly below international benchmarks, amounting to just 2.1 percent of GDP compared to the global standard of 8-10 percent.
  • The new category of mutual funds will offer a transparent and well-structured avenue for participation in projects of national significance.
  • Eligible sectors for infrastructure schemes include energy, transport, logistics, water, sanitation, communication, and a wide range of social and commercial infrastructure.
  • Asset management companies will be required to invest a minimum seed capital of Rs25 million in closed-end schemes with maturity exceeding three years.
  • Closed-end schemes will have the flexibility to offer periodic subscription and redemption windows after one year, subject to conditions clearly set out in the offering documents.
  • Schemes must maintain at least 70 percent of net assets invested in infrastructure securities on a quarterly basis, with any shortfall to be regularised within three months.
  • A transparent fee structure has been introduced, with management fees capped at three percent per annum for equity schemes and 1.5 percent for debt schemes.
  • No sales load will be permitted, though contingent load may apply in the case of early redemption under closed-end schemes.
  • The initiative reiterates SECP's commitment to fostering sustainable growth and deepening capital markets as a vehicle for economic development.

Statistics:

  • $15 billion: Estimated annual infrastructure financing gap in Pakistan.
  • 2.1 percent: Current infrastructure spending in Pakistan as a percentage of GDP.
  • 8-10 percent: Global standard for infrastructure spending as a percentage of GDP.
  • Rs100 million: Minimum fund size for perpetual schemes.
  • Rs25 million: Minimum seed capital required by AMCs for closed-end schemes with maturity exceeding three years.
  • 70 percent: Minimum net assets required to be invested in infrastructure securities by schemes on a quarterly basis.

Sources:

  • Securities and Exchange Commission of Pakistan (SECP) circular
  • Mutual Funds Association of Pakistan (MUFAP)
  • Roadmap 2025-26, Fund Management Department, SECP

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