Banks’ investments in gilt unit trusts made liquid assets

The Securities and Exchange Commission (SEC) said yesterday that the Monetary Board has approved the conditional inclusion of investments in Guilt Unit Trusts (GUTs) by Licensed Commercial Banks and Licensed Specialised Banks under the definition of “liquid assets”.

The conditions are GUTs should be open ended unit trusts; the underlying investment portfolio of GUTs should always be Sri Lanka Government Securities and only 90% of investments in GUTs should be treated as liquid assets.

The move follows SEC as an initiative to develop the unit trust industry, making representations to the Central Bank to consider GUTs as liquid investments under the statutory liquid assets for banks and finance companies.

Gilt Unit Trusts are unit trusts whose underlying securities are investments made in different medium and long-term government securities, called gilt-edged securities, to achieve its secured, low risk investment objectives. This will result in an increase in the investor base and lead to a growth in the unit trust industry.

“Inclusion of GUTs will be a boost to develop the Unit Trust industry and the capital market as a whole along with being eligible to be considered for mandatory investments in Government securities by pension and provident funds as per Gazette notification 1704/18 by the Department of Inland Revenue,” the SEC said.



It also said unit trusts provide a vehicle for unsophisticated investors to access the capital market. Hence developing the unit trust industry and creating awareness of its benefits is of paramount importance to ensure a wider segment of society can reap the benefits and rewards.

Whilst providing investment opportunities, the unit trust conduit is the most effective instrument to broad base the investor base and increase share ownership in corporate Sri Lanka among the rural populace of the country, who lack financial literacy and adequate knowledge on stock market operations. Hence developing the unit trust industry has been identified as a priority project under the ten key projects facilitated by the SEC.

Some of the GUTS are Ceylon Gilt Edged Fund, Comtrust Gilt Edged Fund, Eagle Gilt Edged Fund, Ceybank Gilt Edged Fund (closed end), NAMAL Gilt Edged Fund 1 (closed end), Astrue Gilt Edged Fund, Capital Alliance Gilt Fund and Orient Gilt Edged Fund.