Possible up-gradations in the Alternative Investment Rule – 2015

‘Alternative investment rule – 2015’ has definitely set out the policy guideline for establishing and managing the venture capital firm in Bangladesh and this rule has paved the way for establishing three basic types of alternative investment funds – venture capital firm (firm with an operating history of less than two years), private equity firm (firm with an operating history of more than two years) and impact fund (funds with a socially responsive objective). I will present the critical assessment of this rule.

Sponsors had been provided the LP status and their minimum investment across the tenure of the venture capital had been specified under the law. Quite surprisingly, fund manager’s fees have been made contingent upon the NAV. But the standard worldwide practice suggests that this should be based on the level of committed capital at least on the earlier years. There is no specific mentioned about the escape route for a fund manager. So this lack of ruling regarding this key issue can pose more exit risk in the upcoming future. There is nothing specifically maintained in the rule regarding the performance appraisal method of the fund manager. Moreover, how the valuation expert is going to calculate the realized and unrealized profit on the invested fund has not been calculated in the framework.