Ceybank Unit Trust grows by 82%

Country’s largest unit trust fund’s net assets top Rs. 3 billion; Says market rally has not run its full course

Ceybank Unit Trust, Sri Lanka’s largest Unit Trust Fund achieved a another milestone with net assets exceeding Rs. 3,000 million on October 5, 2009, and recording 82% growth in 2009. BOC is the Trustee to the Funds.
“This remarkable performance was possible due to a more aggressive growth-oriented investment stance taken by the Fund Managers, guided by the Members of our Investment Advisory Panel and the Board who have wealth of experience in global business and finance. We have an excellent Team consisting of seasoned and well qualified investment professionals with more than 15-years experience. Their in-depth knowledge and understanding of the local market, and the tactical allocation into equity facilitated us to capitalise on the post war rally of the market” said Mrs. Siromi Wickremasinghe, Chairman of Unit Trust Management Co. (Pvt) Ltd (UTMCL).

Unit Trust Management Co CEO/ Executive Director Chitra Sathkumara

Chairman of Unit Trust Management Co Mrs. Siromi Wickremasinghe

Ceybank Unit Trust (CUT) is an Income and Growth Fund (Balanced Fund). The Balanced Fund aims to provide a reasonable capital growth in the medium to long term along with a regular dividend to the unit holders.
Although the Fund generally maintains a strategic equity allocation of 75%, tactical shifts to and from equity are made according to the market outlook. Therefore the allocation to equity varies from time to time. “Correct timing of investment and disposal of shares play a key role in beating the market” said Chitra Sathkumara, CEO/ Executive Director of UTMCL. “We buy on market downturns and over reactions to bad news and sell on up markets. We believe in going against the herd and picking stocks at bargain prices” he further said.
The equity portfolio of the Fund has been structured by diversifying across economic sectors and across securities within the sectors. “The Fund focuses mainly on high market cap liquid blue chips along with limited allocation to small cap growth stocks, but is cautious not to be excessive considering the lack of depth in the Colombo bourse. Our experience is that obtaining the right price when it is the time to exit is generally problematic” said Sathkumara.
“At present we are optimistic about the medium term potential of the market, and have increased the equity allocation and explained that to our investors in our last Annual Report. Fundamentals are paramount in selection of stocks but we also believe in being a momentum player in selected companies for short term capital gains. The equity portfolio has also been restructured to reap the benefits of the market recovery” he added.
According to Sathkumara, the post war rally in the stock market is one of the strongest in Asia. No other market in Asia has seen such a strong reversal in sentiment, and turnover has risen sharply due to strong participation of local retail and high net worth individuals and FIIs.
This indicates that investors are expecting the President and the Government to execute better economic and political policies to pull Sri Lanka back from the economic downturn.
Although the current top down view looks worrisome, especially from a valuation perspective, we do not think that this rally has run its full course – though interim pull backs could not be eliminated. When the market climb-up suddenly after the war from its last December low of 1484(ASI), we also sold some equity and realised profits but remained overweight.
We have decided to remain overweight because; First: liquidity is still ample and investor confidence is getting better due to expectation of post war improvements to economic and political conditions in the country.
Second: improvement in trade activities in the North East could have a beneficial impact on the manufacturing and service segments to the extent of triggering an upward revision to earnings forecast. Therefore future corporate earnings could surprise the market positively.
Finally: when the economy begins to stabilise, we believe investors will overlook high valuation multiples because they are underweight in stocks in the midst of rising earnings forecasts, said Sathkumara.