Private equity firms to supervise collective investment schemes

Sok Chan

The Cambodian private equity market has diversified with the inclusion of Securities and Exchange Committee of Cambodia (SECC)’s collective investment scheme

The firms would be regulated by the SECC in a move to curb illegal or fraudulent crowdfunding activities

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The Cambodian private equity market has diversified with the inclusion of Securities and Exchange Committee of Cambodia (SECC)’s collective investment scheme where licensed private entities supervise investment funds featuring a group of investors.

Based on SECC’s prakas (directive) issued on May 29 last year, and in accordance with the Financial Sector Development Strategy (2016-2025), the schemes help the economy grow sustainably while complementing the banking system. The prakas spells out the need for stakeholders to be transparent, efficient and effective. SECC issues the licence to private entities which can be made up of fund managers, fund administrators, fund distributors, and trustees of funds.

Its director-general Sou Socheat says between 2012 and July this year, the total market capitalisation of five listed companies is around $400 million. In addition to that, the corporate bonds market has raised some $50 million from the securities market.

“Now, there is another option for the financial market with the entry of collective investment schemes which are supervised by entities. Only companies licensed by us are allowed to raise funds and supervise the schemes,” says Socheat.

Licensed entities must first create the projects and seek SECC approval before starting to raise funds.

Socheat’s deputy Sok Dara stressed that any fund raising activity via the public for collective investments without SECC’s licence would be considered illegal.For  crowd-funding Investors, they can raise up to $50,000 each time, and up to $200,000 a year, based on four fundraising activities in a year.

“The prakas is to regulate public fund collection with more than 30 investors or private entities with less than 30 qualified investors recognised by SECC, real investmen trusts (REITs), and crowdfunding.  Potential  investors must obtain a license from SECC if they want to raise funds for any investment.

“We have informed the interested parties. They should stop operating their activities immediately if they do not possess a license. The prakas protects the public’s interests and prevents rogue investment methods,” Dara explains.

Three companies have received approval in principle to become licensed scheme managers while Cambodian Investors Capital Partners Plc (CICP) has been granted full license to be a fund manager. Two are foreign companies.

Established in April 2013, CICP, which is a subsidiary of Cambodian Investors Corp Plc, is made up of a group of 300 local investors. It is a private equity firm focusing mainly on small and medium enterprises (SMEs), impact business, and technology start-ups.

As a fund manager, CICP is entitled to collect funds from investors, make investments following predefined investment strategies, and distribute the return on investment back to investors.

According to its website, some $2.2 million financing gap has been bridged through its investment platform, it has resolved 200 SME cashflow problems, and has a pool of 100 local and foreign investors who have committed to supporting SME financing.

CICP ensures up to 18 percent per annum return on investment and accepts a minimum of $1,000 investment amount.

“Since decision-making on investments often revolves around risks and returns, we offer investors with surplus capital but limited expertise the opportunity to manage their investments. We ensure that investors earn sustainable returns proportionate to their investment size,” says Lem Chansamrach, chief executive officer of CICP.

The firm plans to set up a fixed income fund and an SME fund. Both funds target Cambodian SMEs, impact business and tech start-ups. The fixed income fund, which could hit $10 million in the first year, would invest in shares or corporate bonds issued by SMEs.

The SME investment fund is a closed fund with a long-term tenure and a pool of $5 million that would be invested in SMEs, social enterprise, or tech start-ups.

The funds help local investors build a reliable investment platform where they can support and bring benefits to growing local enterprises and the economy in a sustainable and ethical manner, says CICP director Kuy Vat, adding that the funds overcome challenges faced by SMEs in gaining access to finance.

In Channy, Acleda bank presiden.

Acleda Bank Plc president In Channy tells Capital Cambodia that the scheme builds capital power which benefits the economic sector.

“Previously, investors would invest their capital outside the country.

“If we have the right resources that can promote investments, it would create new jobs, raising tax revenues,” says Channy, who is also president of Association of Banks in Cambodia.

Meanwhile, Socheat encouraged more foreign companies to join the market as they bring with them technology and skills.

“All companies must have solid capital, human resources, and a good information technology system,” he says, adding that the securities market in Cambodia is expected to become more active with increased trust among investors.

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