Unit trust industry sees 2% growth in net assets to Rs. 23 b

The net asset value of Unit Trust industry last year grew by 2% to Rs. 23 billion accounting for 0.3% of total assets of major financial institutions in the country, according to the Central Bank’s 2011 Annual Report.

It said the unit trust industry expanded with the formation of new funds.

There were six unit trust (UT) management companies managing 25 funds by the end of 2011. Of these UTs, 21 are open-ended funds, while four are close-ended funds. In terms of investment focus, eight UTs are income funds, six UTs are growth funds, four UTs are balanced funds and seven UTs are specialised funds (money market, equity index linked, tourism, finance and Sharia). One close-ended fund is listed on the Colombo Stock Exchange.

Funds with significant investments in equities were somewhat affected by the decline in prices of listed shares during the year. However, these funds were able to perform better than the CSE price indices on account of portfolio management and diversification.

The share of equities in the investment portfolio of UTs declined to 42 per cent of NAV, while the share of investments in Government securities (Treasury bills and bonds and Reverse Repos) rose to 48 per cent of NAV at end December 2011.

The share of other fixed income securities declined to nine per cent at end December 2011. The total number of unit holders and the number of units issued increased to 26,560 and 2,059 million, respectively as at end December 2011, indicating a positive development in the industry.

In order to promote the participation of retail investors in the stock market, the Securities and Exchange Commission issued a direction that 10 per cent of shares of all Initial Public Offerings should be allocated to unit trusts. In addition, the decision to permit foreign investment in all types of unit trusts will expand the investor base and facilitate the development of the industry. In order to strengthen the regulatory framework for Exchange Traded Funds (ETFs), a new Unit Trust Code came into effect in 2011.