Egypt to widen the pool of companies that can run local investment funds amid push to keep capital at home

Limited liability companies and simple limited partnerships in Egypt could soon be allowed to set up and manage their own investment funds in Egypt, as the Financial Regulatory Authority (FRA) works with the EGX on amending Article 29 of the Capital Market Law (pdf), two government officials tell EnterpriseAM. The change is one of a set of legislative and executive tweaks the two regulators are studying to deepen the market and make it more attractive to local and regional investors, the officials say.

What’s new here? Right now, that license is reserved for joint-stock companies and partnerships limited by shares. The change would widen the pool of companies that can get licensed to set up and manage them.

Why this matters: Many companies have been setting up their funds in neighboring markets instead of Egypt since the current law doesn’t allow them to, and “the amendment will improve the market’s ability to keep hold of Egyptian capital by letting those companies set up locally,” they say. “This amendment will increase the local market’s ability to compete and attract the investment funds it’s targeting,” the officials tell us.

More still needs to be done: Investors want more flexible rules for setting up funds, including opening up subscriptions to a wider base of investors, as long as governance and disclosure standards stay high. Licensing takes too long, capital markets analyst Safaa Fares tells EnterpriseAM: Setting up a fund can currently take several months, and the money waiting on the sidelines loses value to inflation in the meantime. More clarity on tax rules and transparent tracking of how funds aimed at key sectors actually perform are also needed so managers aren’t left guessing, she adds.