Unit trusts for less sophisticated

By Sanjeevi Jayasuriya on 29th July 2010, on Daily News

nvesting in Unit trusts is an ideal instrument to mobilize savings of less sophisticated investors in the country.

The Securities and Exchange Commission of Sri Lanka (SEC) Director Ravi Abeysuriya said the SEC viewed the unit trust industry as a vital component of the capital market, since it is the best conduit to mobilize savings of the less sophisticated investors.

“Over the years the unit trust industry has played a significant role to channel capital into the real economy. However, the industry in Sri Lanka is yet to reach its full potential compared to other regional developed markets where majority of retail investments are channeled to the capital market through unit trusts, mutual funds and exchange traded funds,” he said. The unit trust is designed for less sophisticated investors to participate in the growth of the different sector and to diversify their investments, he said.

In spite of the resurgence of the market, the unit trust industry has remained largely static at around 23,000 unit holders although the Net Asset Value has grown to around Rs 12.5 billion as at April 30, 2010.

Good response for Tourism Fund The IPO of the first ever tourism sector fund, the Ceylon Tourism Fund received a good response yesterday. Ceylon Asset Management Managing Director Dulindra Fernando commenting on the IPO said the response is fantastic. “We have inquiries across the country and the response is overwhelming. It showed an enormous level of interest. There were inquiries from foreigners too. The offer has Rs 60 million commitment and confident that fund could reach Rs 500 million before three months. This shows public confidence in the hotel and travel sector,” he said. (SJ)

There is a need for the unit trust companies to step out of Colombo and reach out to the provinces to capture a wider share of investors by broadening their distribution channels.

They need to consider financial institutions and post offices to market and distribute unit trust funds instead of relying solely on existing distribution structures. They also need to innovate and introduce new products to unlock the true potential of the industry, Abeysuriya said.

It is important to inculcate market awareness and educate investors about the diverse investment opportunities existing in unit trust for the growth of the industry.

The SEC has taken various measures to help develop the unit trust industry including granting approval for the listing of the first close ended fund and supporting a study undertaken by the Unit Trusts Association to develop a strategic marketing plan to popularize unit trust products in the country. “We have also taken action to frame suitable guidelines to encourage the introduction of new funds namely Real Estate Investment Trusts and Exchange Traded Funds.

The SEC is confident that the benefits of the stock market can trickle down to all segments of society through unit trust funds, he said.

As the regulator, we will continue to facilitate and support the industry to explore and crystallize the vast opportunities available in the market.

It is important to work collectively to ensure that the unit trust industry become a vehicle for the working people to build retirement savings and increase the capital productivity of the country.

The unit trust industry will continue to develop to meet the evolving financial needs of the investors, Abeysuriya said.