SL unit trust industry crosses key milestones, gains traction

*Update: Changes were made in the fourth paragraph of the article.

• Number of unit trust holders crosses 100,000  
• Assets under management top Rs. 500bn mark 

By Nishel Fernando 
Amidst the declining interest rates and entrance of new funds, Sri Lanka’s unit trust industry has continued to gain traction this year. The number of unit trust holders surpassed 100,000 and the total net asset value (NAV) crossed Rs.500 billion at end-April this year. 

According to the Unit Trust Association of Sri Lanka, the number of unit trust holders rose to 103,107 at end-April this year, compared to 74,686 unit trust holders a year ago. Simultaneously, the NAV of unit trusts rose by 178.41 percent year-on-year to Rs.505.98 billion in the period. 

At end-April, the open-ended NDB Wealth Money Fund was by far the largest unit trust, with 21,418 unit trust holders and an NAV of Rs.217.27 billion. 

First Capital Money Market Fund is the second largest unit trust with Rs. 53.6 billion in assets under management, closely followed by CAL Investment Grade Fund with Rs. 51.6 billion in assets.

In terms of number of holders, Softlogic Money Market Fund was the second largest unit trust, with 15,640 unit trust holders. 

In 2023, the Securities and Exchange Commission (SEC) approved six unit trust schemes, including one close-ended scheme, which is required to list its units on the Colombo Stock Exchange.

According to the SEC, the number of units issued more than doubled to 13,371,000 units in 2023, compared to 6,283,000 in 2022.

Out of Rs.407.74 billion assets in 2023, Rs.315.23 billion was invested in Treasury bills, compared to Rs.88.8 in 2022, Rs.18.5 billion in equities, up from Rs.11.86 in 2022 and the remaining Rs.70.17 billion was invested in other instruments (commercial papers, trust certificates, debentures, bank deposits, etc).

However, the SEC noted that the SEC is yet to receive any applications from managing companies for exchange-traded funds (ETFs) and umbrella schemes, under the recently introduced Collective Investments Code 2022 (CIS Code) framework.

In the year, the SEC conducted on-site inspections of selected unit trust managing companies, based on a risk-based approach.

“In this risk-based methodology, several key factors, namely the financial strength, adequacy of internal controls and risk management mechanisms, compliance with applicable regulatory requirements and governance standards were considered,” the SEC said.

In addition, the SEC scrutinized the monthly return submissions of schemes and monitored on an ongoing basis to ensure that the schemes followed the requirement on the minimum number of unit holders, limitations on investments, and required liquidity positions as stipulated by the applicable rules to safeguard the interest of unit holders.

“The rules for managing companies brought about a requirement for a compliance officer to be appointed on a full-time basis, whose responsibility is to ensure that the managing company complies with applicable laws, rules and regulations at all times and submission of a quarterly compliance report to the SEC,” the SEC noted.

As of March, this year, there were 17 licensed managing companies established and operated 86 unit trust schemes in Sri Lanka.