SC Malaysia reviews 60 proposals for $245m pooled VC fund

SC Malaysia chairman Syed Zaid Albar (holding the book), deputy chief executive Zainal Izlan Zainal Abidin (Syed's right) and the rest of the top management of Securities Commission of Malaysia.

The Securities Commission (SC) of Malaysia has reviewed about 60 proposals from local and foreign venture capital managers for the RM1 billion ($245 million) venture capital pooled fund that was allocated by state in the 2018 Budget.

“The GLICs (government-linked investment companies) are still reviewing [these proposals]. So, at this stage, we’re still not able to share how much allocation has been done,” said SC Malaysia deputy chief executive Zainal Izlan Zainal Abidin at the launch of SC’s annual report 2018 today at Kuala Lumpur.

The 60 fund managers presented their proposals to the representatives of GLICs. “What we did was facilitate the process for the GLICs instead of them going to these fund managers individually. So each GLIC has their own criteria for the fund manager selection and investment mandate. On top of that, there are some major changes to some GLICs in the past year so things have been put on hold,” he added.

To recap, last May, in a move to enhance the local VC ecosystem, the SC called upon GPs to apply for the RM1 billion ($245 million) fund committed by major institutional investors, with a strong investment preference towards sectors such as ICT and biotechnology.

The SC also hopes to see greater participation from the private sector to spur the local venture capital and private equity industry, added Izlan.

As at 2018, the Malaysia venture capital and private equity industry saw total fund commitments of RM6.08 billion ($1.5 billion). Public funds made up 40.2 per cent while sovereign wealth funds contributed 30.2 per cent to the total fund commitments. Private sector contribution to the industry were led by asset managers (9.7 per cent), followed by corporate investors (10.8 per cent) and individual investors and family offices (5.1 per cent).

The SC said the key growth challenge lies in the limited participation of institutional and private investors. As a result, a significant share of funding in the industry is sourced from government funds.

“If you look at the existing VC funds, quite a number of them are actually funded by the government. We do feel that it will be a healthier development for the VC market if we also get more participation from the private sector,” said Izlan.

Last month, the SC issued a statement saying that government intervention is needed to spur further growth in the local VC ecosystem which include the restructuring of existing public VCs to be more commercially-driven, among other measures.

Overall, the alternative fundraising channels which include VC, PE, equity crowdfunding (ECF) and peer-to-peer financing (P2P), raised RM808.4 million ($197.9 million) in funding for 2018. The VC/PE industry had raised RM613.3 million ($150.1 million). The ECF and P2P sectors have raised RM195.1 million ($47.75 million) by 693 issuers, where 54 per cent of the investors are below the age of 35.

On the other hand, the Malaysian capital market remained resilient, despite the challenges and volatility in global markets, said SC. The total size of the Malaysian capital market as at end 2018 remained at RM3.1 trillion ($760 billion), with the bond market growing by 8.8 per cent to RM1.4 trillion ($340 billion) while equity market capitalisation contracted by 10.8 per cent to RM1.7 trillion ($420 billion).

Meanwhile, the fund management industry had RM743.6 billion ($182 billion) in assets under management, and the unit trust industry recorded net asset value of RM426.18 billion ($104.3 billion) in 2018.

“Uncertainties heightened across global markets throughout 2018 with escalating trade tensions, geopolitical issues and normalisation of monetary policies in developed economies and these have affected risk sentiments, amid increased volatility and liquidity tightening in global financial markets.

“These developments underscore the need for the SC to continuously monitor and assess systemic risk concerns which include early detection of emerging risk trends and vulnerabilities that could contribute to the build-up of systemic risks in the capital market,” said SC chairman Syed Zaid Albar.

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