The Development Bank of Jamaica (DBJ) will be seeking clarification on whether local pension funds and insurance companies can invest in the venture capital market for which policy is now being developed.
Project consultant at the DBJ, Audrey Richards, said legislative review was underway.
"We will, for example, seek clarification of what pension funds and insurance companies can do because these are the natural long-term investors, which in many countries create the supply of funds for the markets," Richards said, while speaking at a Gleaner Editors' Forum on Wednesday.
"We have the professional fund managers. When you are looking to raise capital they will go to the pension funds, insurance (companies) and other investors. These have a natural fit because it's long-term capital. There needs to be some clarification as to where we are with our pension funds and their ability to invest," she said.
Financial Gleaner research has shown, for example, that in the United States the Employee Retirement Income Security Act was passed in 1974 prohibiting corporate pension funds from holding certain risky investments, including stakes in privately held companies. However, the law was relaxed four years later, allowing corporate pension funds to invest in the asset class.
Referring to other local legislation, Richards said that Section 36 of the Income Tax Act, which has been on the books for more than 20 years, makes provision for special tax relief for venture capital outfits.
However, she said, that "in and of itself" was not very enticing to venture capitalists and had not spurred the market in the past.
The venture capital 'ecosystem' that the Development Bank of Jamaica project aims to create is expected to encapsulate a network of investors, entrepreneurs, potential fund managers, incubators, universities and other people or organisations that will be involved in offering the various products or services to that market.
"There's a role for everybody. There is a role for investors, because it provides another asset class for them to invest in and provide that diversification. There is a role for entrepreneurs, because it provides that access to capital that they would not normally otherwise have," Richards said.