Country’s first private equity fund winding up amid poor investor response
The fund, originally set for a 10-year tenure, is now closing after six years
LankaBangla 1st PE Fund, Bangladesh's maiden private equity fund, is winding up due to a lacklustre investor response.
The fund, originally set for a 10-year tenure, is now closing after six years.
Trustee DBH Finance PLC announced that the trustee board's decision to wind up the fund has been endorsed by the Bangladesh Securities and Exchange Commission (BSEC).
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The fund registered in September 2019, with a target size of Tk25 crore, secured Tk1 crore from the sponsor LankaBangla Securities Limited. However, a lack of investors' appetite did not let it reach a satisfactory size, according to officials of the fund manager Lankabangla Asset Management Company.
"As a capital market firm, we tried to play our role in building a robust alternative investment ecosystem in the market. But other institutional and high net worth individual investors did not respond enough," LankaBangla Securities CEO Khandoker Saffat Reza told TBS on Thursday.
Private equity is invested in young companies having growth potential. In successful investments that come through the growth and profitability of the invested firm, private equity investors tend to exit through stock market listing or stake transfer to next-stage private equity investors.
Bangladeshi companies started receiving private equity from some foreign development finance institutions in the 1990s.
In 2009, Scandinavian private equity giant Brummer and Partners elevated it further with sizable investments in companies like Runner Automobiles, Agora.
However, the local investment ecosystem building process had a delayed start as the BSEC came up with its Alternative Investment Rules in 2015.
Six local private equity funds and six venture capital funds have been registered under the rules. However, institutional and wealthy individuals' capital barely flows through the funds, depriving growth-hungry companies of investments.
Alternative investment professionals blame a lack of awareness and a weaker capital market for the poor response of investors.
There are three types of alternative investment funds in Bangladesh — venture capital, private equity and impact investment funds.
Venture capital is startup-focused, while impact investors look for their financial return alongside the positive impact of their investment for sustainability.
