SEBON Revises Seed Capital Policy to Encourage New Mutual Fund Schemes

The Securities Board of Nepal (SEBON) has reduced the mandatory seed capital requirement for mutual fund schemes to as low as five percent, down from the previous 15 percent, in a move aimed at encouraging the launch of new schemes and expanding mutual fund activity in the secondary market.

The decision was made through an amendment to the Collective Investment Schemes (Regulated Fund) Regulations, 2010, introducing a more flexible policy framework for fund managers issuing new mutual fund schemes. Regulators believe the revised provision will help accelerate the growth of the mutual fund industry while strengthening investor confidence.

Seed capital refers to the initial investment that fund managers are required to commit to a scheme before offering it to the public, serving as a demonstration of the sponsor’s confidence and alignment with investors. Under the earlier provision, fund managers had to invest 15 percent seed capital in each scheme they operated.

SEBON officials said the reduced requirement is expected to lower entry barriers for fund managers, promote innovation in fund offerings, and increase overall participation in the capital market. Market participants have welcomed the move, noting that it could lead to a greater number of mutual fund schemes and improved market depth over time.