Investment Management in Sri Lanka

The Scope for Managed Funds in Sri Lanka

Manjula de Silva

Prior to embarking on my task of commenting on the scope for managed funds in Sri Lanka, I feel it is necessary to look at the role played by the fund management industry in capital markets and review its present stage of growth at a global level. The fund management industry plays a vital role in channeling a sizeable volume of savings generated by individuals and corporate entities to the capital markets around the world. These funds are invested by professional fund managers employed by the industry to act on behalf of a variety of pooled investment funds as well as corporations and high net worth private clients. A significant proportion of the funds managed arise from these pooled investment vehicles that include mutual funds/unit trusts, investment trusts, pension funds and life insurance funds. The ultimate owners of all these funds are, to a large extent, small investors. Fund Management Companies are effectively helping these ordinary people of the world to access complex capital markets and optimise investment returns on their savings within acceptable levels of risk. They also contribute, in no small measure, to the efficiency of capital markets through their scientific approach to fund management. Today, the speed with which markets assimilate information and respond with price adjustments reflect the sophistication of the global fund management industry.

The size of the global fund management industry can be gauged by looking at a few numbers. The volume of funds under management globally through the medium of unit trusts/mutual funds exceeds US$ 7 trillion with the United States contributing about US$ 6 trillion. Total assets of pension funds across the world is estimated at about US$ 5 trillion, with the US accounting for about US$ 3 trillion. These numbers are very large even in relation to the GDPs of the respective countries in which these funds operate. For instance, the total...