Ceylon Guardian maintains consistent outperformance in all portfolios

Ceylon Guardian Investment Trust PLC recorded a profit after tax of Rs. 1.92 billion given positive market conditions in 2014/15. The consolidated portfolio value increased to Rs. 27.34 billion, from Rs. 24.23 billion a year earlier; recording an appreciation of 15% when dividend payouts are factored in. Ceylon Guardian’s above average performance was attributed by the Investment Managers in their report to shareholders ‘to booking of profits on selected overvalued stocks’. 

On highlighting the medium term performance inclusive of strategic holdings, five year compounded annualised growth rate was 16.15% p.a. on portfolio value basis and 13.35% p.a. on market capitalisation, vis-à-vis an All Share Index growth of 12.86% p.a. for the same five year period. The portfolio is managed by a professional team attached to Guardian Fund Management Ltd., a company licensed by the Securities and Exchange Commission of Sri Lanka.

Whilst Ceylon Guardian’s own proprietary portfolio forms the anchor funds under management, the Ceylon Guardian Group has now diversified its capital market activity on three fronts – namely client portfolio management, unit trust management (as a joint venture with Acuity Partners) and private equity management. Client portfolio management and unit trusts comprise the fee based business both of which are managed by SEC licensed fund management companies. 

The performance of the fixed income and equity unit trusts have been maintained above their respective benchmarks, with the equity fund in particular consistently outperforming the All Share Price Index, returning a total 69% gain to unit holders since its inception approximately three years ago (benchmark ASPI for the same period was 28.2%). Similarly its institutional client management business has provided consistent returns above benchmark for a range of clients including pension and provident funds and corporates.

Ceylon Guardian Chairman I. Paulraj comments that these businesses “leverage our in house core investment management competencies to service customised institutional portfolios, as well as a wider base of corporate, high net worth and individual investors through the unit trust business which is carried out as a joint venture. Our fee earning assets under management currently amount to Rs. 7.5 billion approx. i.e., Rs. 3.5 billion in client portfolios and Rs. 4 billion in mutual funds,” and this figure has doubled over the last one year. Guardian Group’s own proprietary portfolio amounts to Rs. 27 billion. 

Commenting on private equity Guardian takes the view that PE is a necessary and complementary component of capital markets and that it plans to expand its presence in this segment through collaborative partnerships.

The fund manager’s report observes that “our portfolio strategy, continued to support a selective investment process based on in depth research into the long term portfolio positions we hold. Performance highlights the long term track record of Ceylon Guardian taking into account different market cycles. Our view is that consistency and steadiness in portfolio performance is more important than intermittent superlative growth spurts since the Guardian portfolio is built for long term sustainability and continuity. Therefore, rather than getting into risky but lucrative short term positions, we believe in holding consistently good companies for continued value creation, which may mean that sometimes our cash resources can remain un-invested until such good equity opportunities are found.”

Going forward, Ceylon guardian remains confident that the long term development potential of Sri Lanka will flow through to its capital markets if good policy measures are adopted to support economic activity and good governance. At national level this would involve stable and predictable economic indicators and a consistent policy framework governing private sector investment, whilst at corporate level aggressive growth strategies, profitable expansion and transparent management structures would warrant serious investor consideration.

The country’s ability to build competitive investment houses locally to work alongside regional capital markets companies is also mentioned, provided the level of sophistication of our capital markets is enhanced through strong regulatory frameworks, robust market infrastructure, and broader investment opportunities. The depth of the local capital markets remains a challenge as investors need a variety of companies and sectors to invest in, which includes state owned enterprises and other top private sector corporates so that the capital market is more representative of the economy.