ri Lanka’s unit trust industry grew 75 percent in 2013 to Rs.54.3 billion but the number of unit holders have increased by a mere 6 percent to just under 30,000 investors, in a country with a 20 million population, according to the capital market regulator, the Securities and Exchange Commission (SEC).
The Net Assets Value (NAV) of unit trusts which stood at a paltry Rs.6.8 billion just before the end of the war, rose to Rs.31 billion by the end of 2012, and has made a quantum leap to Rs.54.3 billion end of 2013. While the SEC would like to attribute the recent growth in the unit trust industry to concessions given by the budget 2013, the president of the unit trust association of Sri Lanka P. Asokan said it was due to a combination of factors not limited to budget concessions.
The budget 2013 simplified the process of investing in unit trusts for foreigners and Sri Lankans living overseas, and the tax applicable to the profit and income of unit trust management companies was reduced to 10 percent.
“The industry alone evolved from just 17 funds managed by 5 companies (in 2008) to 50 funds managed by 13 fund management companies. In an industry where only equity funds were available, now has diversified into debt funds and further into multiple funds under them, meeting the different needs of the investors,” Asokan said.
He further said that the biggest impediment to the progress of the industry is the lack of awareness among general public about the benefits of investing in unit trusts.
However the industry is such that any single player cannot afford a big marketing budget given the meager margins enjoyed by the fund management firms.
A firm charges only 2 percent margin (or management fee) per annum on the NAV of the equity fund while the fee is as low as 25 basis points and 75 basis points for debt funds.
Hence, the industry will join the other capital market participants in an island wide awareness campaign starting next month.
Meanwhile, Mirror Business learns that a new unit trust fund management company is entering the industry as end of this week.
Currently, Sri Lanka’s unit trust industry operates with 13 players where NDB Aviva leading the market with 28.8 percent share followed by Ceybank (22.3 percent) and Namal (18.5 percent).
Meanwhile, regulatory support on the industry was seen throughout last year where SEC issued directives on prescribing a minimum number of unit holders for each unit trust and also on daily valuation methods of fixed income instruments.
On-sight visits and monitoring of the performance of the funds and the financial health of the firms were also conducted on a regular basis.
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