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Unit Trusts aim to attract Small Investors in Sri Lanka

Unit Trusts were introduced to Sri Lanka in 1991 and began with only balanced equity schemes; today, unit trusts give investors the option to invest in government and corporate securities, money market instruments and trust certificates against a selected pool of financial assets. This enables investors to select appropriate schemes to meet their respective personal investment goals. Currently, there are approximately 17 such schemes managed by the unit trust providers with over seven billion rupees under management.

Listed Units
Unit trust companies hope to offer many more products and schemes to enable the people of Sri Lanka to invest their money in various types of assets in order to improve their return on investment. It is also anticipated to create more stock exchange listed funds to facilitate easier access by investors to units through stock broking companies.

In a recent market study, it has been found that the public had little understanding of unit trusts and as a result do not invest their savings in this risk-return managed investment option. Very often the money is held in traditional saving schemes or in real assets. It is important to look at the long-term needs of investors and balance their investments to face financial requirements for educational needs of children, retirement, and for unforeseen events in the future. Unit trusts provide an alternate method of investing to meet those financial needs, by investing in high yielding securities such as stocks, treasury and corporate securities, trust certificates etc whilst managing risk through adequate diversification.

Prudently Managed Investments
Unit trust managers select investments prudently and stay within the regulatory guidelines for the industry to ensure safety of investments, while optimizing returns to investors. Market interest rates were higher in this period and helped fixed income investors to generate better returns in a highly inflationary environment. “Unit Trust funds which invested in pure fixed income instruments such as government securities, corporate debt, and trust certificates paid good returns to investors while providing capital protection. Investors in Unit Trusts can enjoy professional management at low cost and other benefits such as liquidity, tax advantages and diversification of investments. It is an appropriate investment for retail investors, professionals and others who have no time to manage money on their own and for institutional investors looking to enhance their tax adjusted returns.

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Investors should seek proper advice on risk-return balance when investing their money. Unit Trust Management Companies are obliged to guide investors in the right choice of investments to meet respective investor objectives.

In the complex financial markets of today, it is important that investors plan their future financial requirements, considering the risk and return prospects of each investment they make. Furthermore, it is important that the return from an investment exceed the average inflation in the economy over a longer period.

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