Senfin Asset Management to launch two new Funds

Senfin Asset Management Ltd. (SFAM) has announced the launch of two new funds, “Senfin Consumer Staples Fund” and the “Senfin Financial Services Fund” – a first of its kind in Sri Lanka. 

The Senfin Consumer Staples Fund (“Fund”) is an open-ended, Balanced Unit Trust that invests in the Colombo Stock Exchange-listed shares that have exposure to the broader consumer and retail markets. 

The  Senfin Financial Services Fund (“Fund”) is an open-ended, Balanced Unit Trust that invests in the Colombo Stock Exchange-listed shares that have exposure to the broader Banking and Financial Services sector excluding the Insurance Sector (for which SFAM has an already launched fund, the Senfin Insurance Sector Fund).

SFAM is a Securities & Exchange Commission of Sri Lanka (SEC) licensed Unit Trust and Private Wealth Management company in addition to providing advisory services to high net-worth clients. SFAM is a fully-owned subsidiary of Senkadagala Finance PLC, a company licensed by the CBSL and one of the largest and most resilient Finance Companies in Sri Lanka with a workforce of approximately 800, across 100 branches in the country.

SFAM expressed the view that as anticipated on the back of the IMF led government reforms, interest rates in the country are on a declining trajectory witnessed by broader drops in yields offered on fixed interest instruments such as, Treasury Bills and Fixed Deposits. This is poised to draw in more investment activity to equity markets, driving up stock prices as investors shift from fixed income. Furthermore, with macro-economic variables improving and the country gradually recovering from the economic crisis, positive sentiment is expected to increase on both local and foreign fronts, thereby rerating equity valuations upwards. In addition, given the increased taxation rates in the country, the equity market being only impacted by a tax on dividends would also benefit investors. On another positive note, high dividend yielding equity counters provide the additional benefit of a steady income stream in addition to capital appreciation. 

As macroeconomic variables improve, we believe it would drive up consumer confidence in purchasing more discretionary products. Furthermore, with the proposed raise in public sector salaries, consumption is expected to increase in conjunction with higher disposable income. We expect that spending on FMCG is to retain its pace, as modern trade can cater to the changing consumer dynamics and offer better value for money. Finally, the increase in investment by supermarket chains would increase the penetration of modern trade and offer wider access to products sold and increase revenue growth in the segment.

Gradual economic stabilisation, removal of import restrictions and declining interest rates are expected to support private sector credit growth, leading to expansions in the loan books of the Financial Services Sector players. This improved credit growth is expected to drive the country’s Gross Domestic Product (GDP) as well. The growth in loan books would also generate more interest income to Financial Services Sector Stocks while Non-Performing Loans gradually decline in a favourable economic climate. In addition, following the negative sentiment towards the sector on the back of the economic crisis of 2022 and Domestic Debt Optimisation worries, valuations for counters within the sector remain depressed and below fair value.

In the dynamic landscape of sector-specific funds, adept risk management becomes paramount, with industry concentration emerging as a central concern. Successful risk mitigation hinges on a meticulous understanding of the distinct characteristics and challenges inherent in each sector. For the Consumer Staples Fund, economic sensitivity, consumer trends, and product diversity are key considerations with the Financial Services Fund’s focus being on interest rate sensitivity, credit risk, and sub-sector diversification.

 In addition, SFAM places very high priority on risk management, compliance and governance and is fully compliant with the Global Investment Performance Standards (GIPS) as well as claiming compliance with the CFA Asset Manager Code. Moreover, SFAM’s Senfin Money Market Fund was awarded the Best Unit Trust at two consecutive CFA capital market awards in 2022 and 2023, having won Silver in 2021.