Unit Trusts
The ideal investment option for Sri Lankans:
With the end of the separatist insurgency, global and local fund
managers and investors now look at the Sri Lankan equities market with
renewed optimism. The Sri Lankan economy has displayed remarkable
resilience and it can be reasonably expected, that if the current
peaceful environment prevails, Sri Lanka's future economic performance
will far exceed its past achievements. It can also be expected that the
performance of the Colombo Stock Exchange, already up 60 percent during
2009, will benefit from the expected boom.
Financial analysts are now increasingly recommending Unit Trusts as
an ideal way of taking advantage of the expected growth in the equities
market. Unit Trusts provide exposure to a diversified and professionally
run portfolio of shares and reduces the risk of individual investments.
A Unit Trust, also known as a Mutual Fund, is a pooled investment
plan in which the capital contributions of investors are combined into a
legally formed Trust Fund, where the money is then invested by
professional fund managers in a portfolio of marketable securities. In
return for their investments, investors receive 'units' (shares) in the
Trust Fund. The income derived by the Fund by way of dividends, interest
and capital gains are divided among the unit holders in proportion to
the number of units they hold, in accordance with the distribution
policy of the fund.
President of the Unit Trust Association of Sri Lanka (UTASL) and the
Chief Executive Officer of NAMAL, S. Jeyavarman the fund manager of the
oldest unit trust in Sri Lanka said, "The Unit Trusts are an excellent
investment vehicle for small investors to participate in the growth
prospects in the capital market while mitigating the downside risk of
markets through diversification of investments".
He said that all unit trusts under the Securities and Exchange
Commission (SEC) of Sri Lanka regulations are required to diversify
their investments as a safeguard for investors, irrespective of whether
it is an equity or income fund. "Investing in a Unit Trust has many
benefits as investors' money is managed by qualified and experienced
professionals that continuously analyse and monitor the performance and
prospects of the investment; the ability to spread money across many
investments and sectors lowers risk of loss; the availability of various
unit trust funds gives you the option of choosing an investment that is
in accordance with changing needs at different stages of life", he said.
All Unit Trusts are governed by a Trust Deed, and the Trustee is a
reputed bank. The Trustees job is to safeguard the interest of the unit
holders and to ensure that the fund manager is acting in accordance with
the Trust Deed. All Unit Trusts are licensed and fund management
companies are regulated by the SEC.
Unit Trusts have proven extremely popular in developed countries as
they are the simplest way of taking advantage of the upside of the
equities market whilst diversifying risk. Local investors can find out
more about Unit Trusts on the UTASL website www.utasl.lk |
