Pension funds and collective investment schemes could soon be allowed to invest in private equity funds if plans by the Capital Markets Authority and the Retirement Benefits Authority to review regulations pull through.

Mr Kung'u Gatabaki, the capital markets regulator chairman, said the move would provide financing for growth of small and medium enterprises (SME).

"The existing regulatory framework for pension funds and collective investment schemes limits their investment in private equity funds but if allowed, they will provide the much-needed financing to boost growth of the sector," he said.

The authority, according to Mr Gatabaki, will also review its regulatory framework to allow private equity funds and venture capital funds to list on the Nairobi Stock Exchange.

"This will offer an exit mechanism as investors seek to unlock the value of their investment," he said.

Speaking during the fifth anniversary of Fusion Capital Ltd in Nairobi yesterday, Mr Gatabaki said the introduction of a new Capital Markets Authority Bill and Securities and Investment Bill for tabling in Parliament was part of reforms to be aligned to international best practices.

International best practices call for good governance within the market to avoid any future collapse of stockbrokers.

Fusion Capital Ltd is a private equity fund that finances the growth of companies, especially SMEs in East Africa.