The announcement by Ceylon Guardian Investment Trust Plc and Acuity Partners Ltd., of a joint venture to tap opportunities in asset management business is expected to boost the unit trust industry.
The new venture under incorporation, called Guardian Acuity Asset Management Ltd. will commence business by launching a series of unit trusts catering to the local and international market.
It will also further continue to explore other opportunities to collaborate in the asset management business over time. The unit trust funds will focus on equity and fixed income investments in the initial stages. The size of the unit trust and the brand name hasn’t been firmed up yet. The unit trust funds will focus on equity and fixed income investments in the initial stages.
Analysts said given the richness, expertise, acumen and extensive reach of the promoters, the new venture will be a boost to the unit trust industry apart from being aggressive.
Acuity Partners is a joint venture between the Hatton National Bank and DFCC Bank, while Ceylon Guardian is a subsidiary of the Carsons Group through which the conglomerate undertakes its investment business .
Ceylon Guardian holds a listed investment portfolio of approximately Rs.38 billion including listed and private equity and manages outsourced client funds and a Sri Lanka country fund domiciled overseas.
In terms of reach HNB’s extensive branch network covers 208 locations across the country. DFCC has nearly 20 of its own branches whilst DFCC Vardhana Bank has a network of 126 branches and service centres island wide which comprises of 51 branches and 75 service centres via its tie up with Post Offices countrywide.
Interestingly DFCC was also engaged in promoting the pioneer unit trust industry NAMAL whilst it currently holds a 30% minority stake. Carson Group also has a stake in the leading unit trust Ceybank. It was unclear what would be the future of the shareholding of DFCC and Carson’s in the respective unit trusts but most analysts expect the new entity to be the likely focus of them.
The new venture will be equally owned by both entities and its Board will constitute equal representation from both partners.
Last year the Unit Trust industry had substantial growth in net asset value, investors and number of units in issue with entry of new players, number of unit trusts rising to 21 as well as fresh investments, products in tandem with boom in capital markets.
The number of unit holders grew by over 6% to nearly 25,000 whilst net asset value rose by 122% to Rs. 22 billion.
The Budget 2011 also gave a big boost to unit trust industry exempting foreigners and foreign funds from exchange control restrictions on investments in unit trusts.
The new venture aims to bring together Acuity’s and its partner banks’ access to a wide network of clientele through its international and local partnerships and Guardian’s core competence in fund management. Acuity Partners’ core activities include investment banking, corporate finance, stock broking and a primary dealership that deals with an extensive corporate, high networth and retail client base.
Guardian and Acuity said post war economic development in Sri Lanka will see increasing per capita income and savings rates amongst the people which would translate to a demand for a wide variety of savings and investment options that meet the needs of the general public.
Therefore it is likely that over time, savers would move away from traditional savings and fixed deposits schemes to more sophisticated savings products that combine the benefits of share portfolio investments and fixed income instruments.
Unit trust products lend themselves to be innovatively structured to create savings plans and mechanisms that match the risk and return profile of different investor categories with varying lifestyles and income needs at different times in their lives. The demand for such savings products must, of course, naturally be combined with a better understanding of the risks of such investments and investors would therefore need to be fairly mature to be able to use such savings plans effectively. Guardian Acuity Asset Management hopes to offer the Sri Lankan investing public innovative savings schemes that cater to increasingly sophisticated investment needs.
The joint venture company presently under incorporation, will in due course obtain approval for its unit trusts from the Securities and Exchange Commission of Sri Lanka and will thereafter launch the products formally to the market. The Board of Directors of the proposed joint venture company would consist of Chandima Gunawardena (Chairman from Carson’s), Rajendra Theagarajah (From HNB), Ray Abeywardena (from Acuity), Tyrone De Silva (from DFCC), Ruvini Fernando (From Guardian Capital) and Krishna Selvanathan (from Carson’s). Niloo Jayatilake (from Guardian Capital) is proposed as the alternate for Chandima Gunawardena.