SEC introduces new categorisation framework for unit trusts

The Securities and Exchange Commission of Sri Lanka (SEC) last week directed all managing companies and trustees of Collective Investment Schemes (CIS) to adopt a new categorisation structure for unit trusts, to standardise the fund classification across the industry.

The directive, issued under Sections 16(c) and 16(d) of Securities and Exchange Commission of Sri Lanka Act, No. 19 of 2021, was approved at the SEC’s 522nd meeting held on September 16, 2025.

Under the new framework, the unit trusts will be categorised into seven types: Growth, Balanced, Income, Money Market, Gilt, Index and Sector Specific Schemes, each defined by distinct investment objectives and strategies.

The funds under the Growth category will aim for capital appreciation over the medium to long term, with at least 80 percent of their net asset value (NAV) invested in equities. The Balanced funds will target both capital appreciation and periodic returns by maintaining a 60:40 ratio between the equities and fixed income investments.

The Income funds will prioritise steady and regular income generation, investing a minimum of 70 percent of their NAV in fixed income securities such as government securities, bonds and corporate debentures.

The Money Market funds will focus on short-term returns and liquidity, with at least 90 percent of their NAV invested in money market instruments permitted under the CIS Code.

Meanwhile, the Gilt funds will allocate a minimum of 80 percent of their NAV to government securities, treasury bills, treasury bonds and related repurchase agreements. The Index funds will aim to replicate the performance of a selected index by investing a minimum of 90 percent of their NAV in securities tied to that index.

Finally, the Sector Specific schemes will invest a minimum of 90 percent of their NAV in a particular sector or industry to capitalise on cyclical performance trends.

The SEC directive instructs all managing companies and trustees of CIS to implement these categorisations as part of their fund management framework.

The directive is effective from October 1, 2025. 

All managing companies and trustees of Collective Investment Schemes are required to be in full compliance with this directive by April 2, 2026.