PE sector to continue growth trajectory

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