The emphaxsis is placed that small investors are confused as to how to invest, where to invest and when to invest as the majority of the Public has not understood the concept of Unit Trusts, due to the lack of awareness and the short- term direction of the Market. In recent times, there has been more interest in the Unit Trust Industry but the potential investors need to recognize that Unit Trusts are profitable and safe for the small investor. Unit Trusts are considered as a financial intermediary where a common pool of savings is created by a number of investors or considered simply as a mechanism of pooling resources by issuing units to the investors.
The investors enjoy a host of benefits by investing through Unit Trust. The main advantages of investing in Unit Trusts are; Diversification of the investments; Expert professional fund management at a lower cost; Easy to buy and sell, or to transfer; Long-term prospects.
Certain issues are yet to be resolved
II. Create ease of access to the small investor through effective distribution channels, which brings about challenges to distribute units in the Provinces.
III. The subsidiaries of the large Banks have been Unit Trust Managing Companies which arises to conflicts of interest. However, recent changes in the Banks‟ income sources which target fee based income has given opportunity for Unit Trusts to market their products via the wide network of branches of the Banks and Financial Institutions. There is also a need to develop the distribution network to facilitate Banks to distribute units by encouraging Unit Trust Managing Companies to maintain sales staff in the Banks to sell units. The cost of setting up a separate distribution network is not financially feasible.
IV. With the increase in internet activity in the Provinces, the internet can be used a method of distribution. Therefore, websites with all the information should be provided for this purpose.
Presentation into three main areas
1. The Unit Trust Industry has been challenged for the last 20 years where competing with other products have been challenging, whilst it has been difficult to scale up and the penetration levels have been low. Companies at the inception commenced with some foreign affiliation so therefore they had sophisticated processes, research, compliance procedures and maintained a certain level of integrity amongst the players and the industry as a whole. Since most of those players have been in existence for a very long time it is useful to use that knowledge and take advantage of the current context to develop the market.
2. The answer as to why the market has not taken off as expected, is that the Unit Trust Companies did not have the resources financially to market the products. However, there has been an increase in the number of firms that have obtained licenses to become Unit Trust Managing Companies and this is a positive development in the Unit Trust Industry.
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3. There has been a further boost for Unit Trust Companies, as foreign residents can also invest in all unit trusts. Previously a foreigner could only invest in Growth Funds. Although ETFs and other developments are taking place, it is important to develop the distribution network. There is potential to bring in more non-residents into the market and for the Industry to move forward. Currently local market sales are around LKR. 150 million to LKR. 200 million a month, which shows growth and acceptance of Unit Trusts in the local market. There is a need for more aggressive selling to develop this industry
Presentation into three main areas
1. The Unit Trust Industry has been challenged for the last 20 years where competing with other products have been challenging, whilst it has been difficult to scale up and the penetration levels have been low. Companies at the inception commenced with some foreign affiliation so therefore they had sophisticated processes, research, compliance procedures and maintained a certain level of integrity amongst the players and the industry as a whole. Since most of those players have been in existence for a very long time it is useful to use that knowledge and take advantage of the current context to develop the market.
2. The answer as to why the market has not taken off as expected, is that the Unit Trust Companies did not have the resources financially to market the products. However, there has been an increase in the number of firms that have obtained licenses to become Unit Trust Managing Companies and this is a positive development in the Unit Trust Industry.
