How to Invest

A fund is a collective investment pool made by many investors with a common investment objective. This pool of money is used to purchase a portfolio of financial securities. In exchange for the money invested, the fund issues fund units to each investor, who are then known as unit holders.

A fund is set up by a Trust Deed and is an independent legal entity. It has its own financial accounts and files tax returns. The Trust is administered by its Trustee, Hatton National Bank PLC.

Open-ended funds are funds where investors can enter and exit the fund at any time. There is no restriction on the number of units to be issued by the fund and the fund has no maturity.

Unlike other investment tools, Unit Trust Funds were introduced so that people could start investing with small amounts, since usually this is not the case. Also,  pooling your money with other investors can offer these advantages:

• Diversification: A single fund can hold more securities than you as an individual or a company
  could buy with limited resources.
• Professional management: A professional fund manager will manage the fund and continuously monitor its investments.
• Convenience: Fund units can be bought and sold on any business day.

Money market funds
A Money Market Fund is ideal for investors looking for short-term gains as the fund holding period is typically 12 months. It also provides higher liquidity and the ability for investors to enter and exit anytime without a fee. Money Market funds primarily invest on short-term securities such as Repos, T- bills, Fixed deposits, Commercial papers, and trust certificates.

Equity funds
An Equity Fund is suitable for long term investors who can withstand temporary market fluctuations. The fund will predominantly invest in Sri Lankan listed equities providing the fund investors the opportunity benefit from long-term capital appreciation and dividend yields of equity investments.

The equity fund will predominantly invest in listed stocks/shares in the Colombo Stock Exchange (CSE).

The money market fund will predominantly invest in short-term fixed income securities such as,

– Government bonds
– Treasury bills
– Bankers’ acceptances
– Commercial papers
– Securitized trust certificates
– Fixed deposits
– Repos and reverse repos

Hatton National Bank PLC

These are the fees charged by the Trustee and Custodian (HNB) to maintain the security of the underlying assets and the securities are in the funds’ name. This fee will be charged to the fund and not to individual investors.

Funds are valued every business day by calculating its NAV (Net Asset Value) per unit. This is calculated by adding up the current value of all shares, debentures, trust certificates, repos, other securities and cash in its portfolio. After subtracting out certain expenses of running the fund (e.g. Management fee, Trustee fee, Custodian fee and other operating expenses), the final figure is divided by the fund’s total number of units in issue to arrive at the NAV per fund unit.

For example, assume you will get 5000 units at the price of LKR 100 per unit for a total investment of LKR 500,000. If the price appreciates after 6 weeks to LKR 110, this means that the market value of your total investment has increased from Rs. 500,000 to Rs. 550,000.

Citizens of Sri Lanka who are resident within Sri Lanka

• Companies, corporations or institutions incorporated or established within Sri Lanka
• Approved provident funds and approved contributory pension schemes registered/ incorporated/ established in Sri Lanka
• Non-residents: Persons who are not residents of Sri Lanka, companies with limited liability or bodies corporate established/ incorporated outside Sri Lanka

Yes. By opening an Inward Investment Account (IIA) with any Licensed Commercial Bank (LCB) in Sri Lank, both individual and institutional investors can conveniently route funds in and out of Sri Lankan funds.

An investor’s investment value in a fund is determined based on the Unit Price as at date. Unit prices are variable and subject to change, driven by the risks associated with the underlying instrument the fund invests in. This is mainly applicable for Equity Unit Trust Funds where Unit Prices reflect the change in share prices. But this can also be applicable for Unit Trust Funds invested in fixed income securities, which are exposed to risks such as default.

• Securities and exchange commission (SEC)
• Trustee/Custodian bank – Hatton National Bank PLC
• Fund auditors
• Fund managers governed by the CFA institute code of ethics and standards of professional conduct
• Internal compliance and risk management team