Aggressive drive to increase UT spread in the country
A mere 0.061 per cent of the population in the country has invested in Unit Trusts (UTs) for its entire existence of 24 years, reflecting the lack of financial illiteracy, a top official said.
Many Sri Lankans still don’t have a proper understanding of how UTs function, and their potential benefits for long-term wealth creation, Securities and Exchange Commission (SEC) Chairman, Prof. Harendra Dissabandara, stated.
At a recent UT awareness forum, he acknowledged that the industry is actively trying to address this through the Unit Trust Association of Sri Lanka (UTASL) and the SEC, launching awareness campaigns to promote financial literacy and display the benefits of UT to a wider audience.
Data shows that 20 years ago, UTs collected Rs. 500 million with 23,820 accounts and Rs. 4.9 billion worth of funds under management. Now 16 management companies manage Rs. 601 billion funds, Prof. Dissabandara said. The Rs. 601 billion is under 90
functioning funds belonging to 16 management companies. This can be increased easily by attracting customers not only in Colombo but also in the suburbs and outstations, for which there has to be a proper plan, he explained. It was also noted that this year alone, Rs. 56.4 billion was attracted to UTs by around 16,971 investors.
Prof. Dissabandara said that proposals to grant more weight to UTs were submitted to the Treasury by the SEC. He said that many, especially in the older generations, have a strong cultural preference for safer, more traditional investments such as fixed deposits, which are seen as offering guaranteed returns.
“With UTs investors spread their money across a wide range of assets like stocks, government securities, and corporate debt, which minimises the risk factor. However, Sri Lankans still don’t have an idea about risk. It is important to note that with UT’s risk is professionally managed.” The regulator has identified certain gaps in the industry, and these will be addressed, he added.
Unit trust fund managers said that the post-pandemic economy conditions, high inflation, and a growing awareness of how inflation erodes savings have led more people to consider UTs. “Low interest rates make bank deposits less attractive, which can push corporate and retail investors towards UTs, which has higher yields, one fund manager said. Many funds offer high liquidity, allowing investors to withdraw their money without significant penalties, unlike long-term fixed deposits.
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