Sri Lanka Equity Fund Relaunches for Foreign Investments Seeking Better Returns in Frontier Markets

08th December 2010, www.lankabusinessonline.com

Carsons group wants to lure foreign investors seeking higher returns to invest in post-war Sri Lanka by re-launching a country fund it manages that will put money in high-growth stocks, officials said. The Sri Lanka Fund is an open-ended mutual fund that will also target Sri Lankans living overseas who want to invest in listed firms which are expanding after the end of the island's 30-year ethnic war in May 2009.

Minimum investment in the Sri Lanka Fund, incorporated in the Cayman Islands and registered with the Singapore Monetary Authority, would be 50,000 US dollars, said Ruvini Fernando, director of Guardian Fund Management, which manages the fund.

Guardian manages over 300 million US dollars of assets of the investment companies of Carson Cumberbatch, a diversified group with interests in oil palm plantations, brewing and real estate in south and south east Asia.

"Now, with the peace dividend, we feel the time is right to revive the fund and grow it," Carsons director Mano Selvanathan told a news conference.

"We're in a position now, with exchange controls being liberalised to attract more investments. Maybe Sri Lankans themselves could, with the new rules, invest in the Sri Lanka Fund through the Cayman Islands and reinvest back in Sri Lanka."

As promoters, Ceylon Guardian Investment Trust and Ceylon Investment have invested two million US dollars as seed capital in the Sri Lanka Fund "to give foreign investors confidence that the promoters are sharing the same risk they're sharing," Fernando said.

"Already, the two million dollars has grown by about 50 percent."

Post-war optimism and revived corporate earnings sent the Colombo bourse to record highs this year although the market has cooled somewhat after regulators imposed limits on trading with borrowed funds.

The economy is forecast to grow at eight percent this year amid a boom in tourism, rapid infrastructure construction and increased consumer spending.

"Western funds are not getting enough returns (in their own markets) and are looking for higher returns in frontier markets like Sri Lanka," said Chandima Gunawardena, director of Carsons.

Fernando said the Sri Lanka Fund's investment strategy would have a 3-5 year focus with money invested in high-growth sectors and firms with dynamic management and expansion plans expected to make immediate gains after the war.

"We will only invest in listed securities. Because this is an open-ended fund investors can come in and go out any time."

The five sectors in which the fund will initially invest in are banking, finance and insurance; diversified conglomerates; hotels and travel; manufacturing and beverage.

"Any economic development process starts with banks, with expansion in lending and funding activity. The hotel sector will gain from the tourism boom," Fernando said.

"In the diversified sector we will invest mainly in companies with exposure to tourism and infrastructure like John Keells Holdings and Aitken Spence. The beverage sector will gain from increased consumer spending and investment in manufacturing will be more oriented towards the construction industry."

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