Bridging a 30-year gap: A new push to move unit trusts from financial tool to household name

By Nishel Fernando

Despite being introduced to Sri Lanka in 1991, unit trusts remain one of the least understood and utilised financial instruments among the public. For over three decades, they have been the preserve of a small circle of seasoned investors and high-net-worth individuals, while the broader population has overwhelmingly stuck to traditional savings accounts and fixed deposits.

This persistent gap is stark. The Unit Trust Association of Sri Lanka (UTASL) press release notes that as of August 2025, the industry’s total assets under management reached a significant Rs.601 billion. However, this wealth is held by only 131,609 unit holders. In a nation of 22 million people, this represents a market penetration of less than one percent. As one industry expert noted, unit trusts account for a mere 1.5 percent of the total financial assets held by the public.

Now, the industry is launching its most significant-ever public outreach to change this narrative. The UTASL, representing 16 licensed fund management companies, has launched the ‘Dhanaya Wadana UT’ (Wealth Building UT) investor awareness initiative. Kicking off with a public engagement event at the World Trade Centre (WTC) in Colombo from October 27 to 31, the campaign’s stated goal is to “empower the public to build wealth through unit trusts”.

Speaking at the launch, UTASL President Christine Dias Bandaranaike emphasised that the campaign’s core mission is education.

“Our key goal going forward is to educate and make the public understand the difference between savings and investing and how unit trusts or UT can help them to do that,” she said.

Bandaranaike framed the initiative as a “movement to make investors aware of unit trusts, to take away the mystery” and ensure every Sri Lankan, from the seasoned to the novice, has the knowledge to make informed financial decisions. Unit trusts, she explained, “are a very accessible and powerful vehicle for wealth creation because they offer professional management, diversification and affordability. You can start investing for as low as Rs.1,000.”

While the industry’s optimism is clear, the regulator offered a far more critical and passionate perspective. Securities and Exchange Commission (SEC) Chairman Senior Professor Hareendra Dissabandara did not mince words, calling the low participation a “joke”.

“How many investors are there? 134,000... in a population of 22 million. This is a joke,” he stated bluntly. 

He expressed deep frustration that an instrument designed for the small, rural investor has failed to reach its target audience.

“The dream we had three decades ago was not this,” Professor Dissabandara lamented. 

“We saw a dream of people in distant villages... farmers... taking their harvest money and investing it to become wealthy. What we see today is the rich getting richer. Unit trusts are not for the rich to get richer; they are a path for the poor to become wealthy.”

He directly challenged the industry’s starting point for its campaign. 

“We started this campaign at the WTC, the central hub of the wealthy... inviting the rich to come and invest more. I am happy they have also started in Pettah... but we must take this to the village.”

This campaign, therefore, is not just about marketing a product; it’s about fundamentally demystifying it. A unit trust is essentially a pooled fund where money from many investors is collected and invested by a professional fund manager in a diverse range of assets such as stocks, treasury bills, treasury bonds and corporate debt. As the campaign’s introductory material states, “it’s the practical way to avoid putting all your eggs in one basket.”

CT Smith Asset Management Director/CEO Bimanee Meepagala provided a technical breakdown aimed at building public confidence. She explained that the biggest barrier to entry—fear—is directly addressed by the industry’s structure.

The system is built on a “two-key” model of a fund manager and a trustee. The fund manager, licensed by the SEC, makes the investment decisions. However, the trustee—typically a major bank like HNB, Deutsche Bank or Bank of Ceylon—legally holds all the assets on behalf of the investors.

“For example,” Meepagala explained in her speech, “if the fund manager decides to place a fixed deposit, they instruct the trustee to execute it. That fixed deposit certificate is held by the trustee, not the fund manager.”

This separation is a critical safeguard.

“If something were to happen to the fund management company ... all the securities, all the assets, are safe with the trustee.”

This regulated structure, she argued, allows the investors to access markets they could never enter on their own. 

“You can invest with as little as Rs.1,000,” Meepagala noted. 

“If you want to buy some stocks, for example, one share of Harischandra was recently Rs.7,600. But through a unit trust, you can get exposure to a whole basket of such shares for just Rs.1,000.”

The campaign’s central challenge is convincing a nation of “savers” to become “investors”. The Professor Dissabandara  highlighted this, noting that Sri Lankans are stuck in a mindset of savings accounts and fixed deposits, which currently offer “2, 3, maybe 5 percent” interest.

This is where unit trusts present their most compelling case. Meepagala pointed out that Money Market unit trusts, which invest in short-term, secure instruments like treasury bills, offer returns “around 7 to 8 percent,” comparable to a one-year fixed deposit. The crucial difference, she stated, is liquidity. 

“You can often withdraw your money within one day. It is an alternative to a savings account but with much higher returns.”

For those with a higher risk tolerance, the returns have been even more dramatic. 

Professor Dissabandara pointed to the equity market. 

“The stock market has given a return of 49.7 percent,” he said. 

“The equity unit trusts have given returns of 50 percent and on average, around 42 percent. Why would you stay in a bank for 2-5 percent when you can get 42 percent?”

He argued that unit trusts offer these stock market-level returns without the “headache” of “sitting and watching a board all day.” The professional fund manager handles the stress and analysis, all for a small annual fee, typically around one percent.

Professor Dissabandara argued this shift is not just a personal financial decision but a national imperative. He identified Sri Lanka’s core economic weakness as a “zero” culture of personal financial planning.

“We must understand the difference,” he urged. 

“We ‘save’ money for an emergency. We ‘invest’ money to achieve a long-term goal. A nation that only saves cannot grow. A nation that invests can.”

He pointed to Cinnamon Life as the ultimate proof of concept. 

“The largest private-sector project in this country... a US $ 1.4 billion project. Of that, US $ 1.2 billion was raised from the Sri Lankan capital market. That is capital formation. John Keells showed it can be done. This is the only way to build a nation without debt.”

By channelling the small-scale savings of millions into unit trusts, those funds become the capital that can build the next Cinnamon Life, funding national development and breaking the cycle of foreign debt.

The Dhanaya Wadana UT initiative is therefore carrying a weight far heavier than just its Rs.601 billion in assets. It is an attempt to rewire the financial DNA of the average Sri Lankan. The association has plans to take the campaign beyond Colombo, to universities and regional hubs like Jaffna.

The challenge is immense. As Professor Dissabandara acerbically noted, “If a lottery ticket seller can convince people to spend Rs.40 on a ticket, why can’t unit trusts, which offer a visible 50 percent return, do the same?” 

The campaign’s success will depend on whether it can finally provide a convincing answer to that question and turn a 34-year-old financial product into a household name.