Ceylon Income Fund, managed by Ceylon Asset Management Co. Ltd expresses optimism that foreign investors will go for "Structured Products" such as Unit Trusts, with trustee and custodian functions performed by an International Bank, operating under the regulatory framework of the SEC.
Dulindra Fernando, the Managing Director of Ceylon Asset Management, told the Business Times that foreign investment may not necessarily flow into the Colombo Stock Exchange since global investors have lost their appetite for equity markets for now. "As global investors react to the European and US debt crisis next year, you can expect foreign investment into Sri Lanka to increase gradually", he added.
On the 18th of August 2011 Sri Lanka lifted restrictions on foreign investment into Fixed Income Unit Trusts (Gazette No. 1719/22). Now foreigners are allowed to invest freely in any Unit Trust via SIA (Securities Investment Account Mr. Fernando said adding that several foreign and corporate investors had already stepped into invest in their Ceylon Income Fund.
He said that in order to encourage further investments in to unit trusts and mutual funds, incentives had been granted in the form of withdrawing certain withholding taxes in 2012 budget. Thus, the withholding tax of 10%is not payable on dividend paid to unit trust / mutual fund. Also when unit trusts mutual funds pay dividend no withholding tax is deductible on such dividends.
Ceylon Income Fund has become the best performing fixed income mutual fund in Sri Lanka recording an after -tax nett return of 12.39% from Rs.152.29 million in the financial year ending at 31st March 2010 to Rs. 182.16 million for the financial year ending 31/03/2011.
The fund now enlarged to Rs. 414 million, invests primarily in treasury bills, bank guaranteed debt instruments and corporate debt rated BBB- or above by Fitch, said Mr. Fernando. He revealed that it was also the best performing fund of all Unit Trusts in the island during the 10 months up to October 31, 2011* while being amongst the lowest in fees charged.
The Economic Advisor of Ceylon Asset Management Mr. Michael Preiss said , "The oversubscription of Sri Lanka's USD 1 billion sovereign bond issue reveals strong investor interest in Sri Lanka fixed income returns, which will certainly extend to the Ceylon Income Fund.
The attractive yields of 'Rated' Finance companies, regulated by the Central Bank of Sri Lanka, will attract a large quantum of foreign capital via Unit Trusts due to improving risk ratings, a stable currency and healthy growth."
"The European Central Bank (ECB) has reduced their interest rates to 1.25% to boost the struggling European Union (EU) economy as investors flee Italy and Greece. The US Treasury bill rates pay only 0.11%. What was 'risky' yesterday is not risky today and vice versa. The risk in the west is rising while risk in Asia is declining." He added.
The open ended nature of the fund allows investors to withdraw their funds at any time without any penalties or exit fees.
The tax exempt returns attract a broad corporate and retail clientele. The Trustee and Custodian of the fund is Deutsche Bank AG and the fund is audited by Price water house Coopers, while the fund operates under the regulatory framework of the Securities and Exchange Commission of Sri Lanka, he disclosed.
Ceylon Asset Management (CAM) has an 11 year track record in index fund management to offer stock market returns at minimized risk. In addition to the Ceylon Income Fund CAM has an innovative portfolio of funds including the Ceylon IPO Fund, Ceylon Index Fund, Ceylon Tourism Fund and the Ceylon Financial Sector Fund. |
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