Ceybank Asset Management (CAM), Sri Lanka’s largest unit trust fund manager, has launched an open ended gilt-edged fund aiming to attract small investors especially in rural areas, officials said.
The ‘Ceybank Surakum’ fund will invest in government Treasury bills and bonds and other government-backed securities but not in equities and aim to give a return higher than interest rates on bank deposits which have been falling.
Chitra Sathkumara, chief executive of CAM, said their initial target is to raise at least two billion rupees
“This will give small investors a better choice,” he told a news conference.
“In Sri Lanka most people invest a part of their money in savings accounts and fixed deposits but interest rates on savings accounts are falling while the cost of living is increasing, and people get poorer.”
This had prompted some investors to search for high interest yielding but risky products and lose money in financial scams, he said.
“Many investors lost their life saving trying to get super returns. The Surakum fund aims to earn returns above savings accounts while ensuring safety. We aim to bridge the gap between savers and investors through this fund.”
The minimum investment in the fund is 10,000 rupees and each unit 10 rupees.
The Ceybank Surakum fund will pay two dividends a year in January and July, with the first dividend being paid in July 2011.
Dividends from investments are tax free, the investments can be encashed at the prevailing market price and investors can switching their money among other funds managed by CAM.
The fund will be marketed with the help of the branch network of the state-owned Bank of Ceylon, which has a 43.4 percent stake in CAM.
Other shareholders are state-owned Sri Lanka Insurance, Carson Cumberbatch & Co. and Unit Trust of India, said K Hewage, chairman of Ceybank Asset Management.
Proposals in the government’s 2011 budget announced last week exempting unit trusts from certain taxes and relaxing foreign exchange controls to allow foreigners to invest in the funds will help promote the industry, he said.
The budget also made income earned by unit trusts from listed stocks and bonds free from income tax.