SECP launches new mutual funds category

August 22, 2025 (MLN): The Securities and Exchange Commission of Pakistan (SECP) has introduced a new category of mutual funds titled Infrastructure Schemes under the framework of open-end collective investment schemes, aimed at channelling long-term savings into critical infrastructure development.

The move follows extensive consultations with the Mutual Funds Association of Pakistan (MUFAP) and industry stakeholders after the proposal was first floated at the Mutual Fund Focus Group Session 2025.

The initiative is seen as a key milestone under SECP’s Fund Management Department Roadmap 2025–26, designed to strengthen capital markets’ role in addressing Pakistan’s infrastructure financing gap.

Pakistan currently requires nearly $15 billion annually to expand and modernize its infrastructure, yet spending remains just 2.1% of GDP compared to the global benchmark of 8–10%.

By carving out a distinct regulatory category, SECP aims to give greater visibility to infrastructure-focused funds while offering investors transparent avenues to participate in projects of national importance.

Under the framework, Asset Management Companies (AMCs) may structure infrastructure schemes as equity, debt, or hybrid funds, with eligible sectors ranging from energy, transport, and logistics to water, sanitation, healthcare, education, industrial parks, affordable housing, and tourism facilities.

To enhance investor protection and confidence, the framework sets minimum fund sizes of Rs100 million for perpetual schemes, along with AMC seed capital requirements of Rs25m in closed-end funds exceeding three years’ maturity.

Closed-end schemes may also offer periodic subscription and redemption windows after one year, with conditions clearly outlined in offering documents.

The rules further mandate that at least 70% of a scheme’s net assets remain invested in infrastructure securities on a quarterly basis, while allowing flexibility in Net Asset Value (NAV) disclosures for closed-end funds, which must be published at intervals not exceeding one month.

A transparent fee structure has also been introduced. Management fees are capped at three percent per annum for equity schemes and 1.5 percent for debt schemes, while hybrid schemes will follow a weighted average based on asset allocation.

No sales load will be permitted, though contingent load may apply in the case of early redemption under closed-end schemes.

By establishing this dedicated category, SECP seeks to bridge Pakistan’s infrastructure financing gap through long-term domestic savings, while ensuring strong investor safeguards.

The initiative reaffirms SECP’s commitment to fostering sustainable growth and deepening capital markets as a vehicle for economic development.

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