The promoters of Sri Lanka’s first closed ended Unit Trust to be listed on the Colombo Stock Exchange last week expressed confidence that clearance for foreign investors to buy into the billion rupee fund will soon be granted.

Although the closed ended structure of the fund which will be liquidated in 10 years does not allow redemption of units once purchased, its listing on the CSE allow investors to buy and sell units on the stock market allowing them a free exit route at any time of their choice.

The Namal Acuity Value Fund for which Rs. 200 million seed capital has been provided by HNB and the DFCC Bank will focus primarily on stock market investment but has retained the flexibility to move into fixed income instruments if necessary, Mr. S. Jeyavarnam, CEO of Namal, told a Colombo news briefing last week.

That prevents foreign investors from buying into the fund as the rules currently stand. Although foreigners are freely permitted to invest in companies quoted on the Colombo Stock Exchange via what are called Share Investment External Rupee Funds (SIERA), they are not permitted to invest in equity through unit trusts with over 20% of their funds in fixed income instruments.

The new fund, which is looking at the stock market where prospects are seen as particularly bright at present, has retained flexibility to shift to fixed income instruments should the need arise.

That is the bar which must be cleared if foreigners are to be permitted to buy into the fund.

"We’ve had no new equity fund launched for 10 years,’’ Jeyavarnam said. ``The last one was the Namal Growth Fund. But today the situation is very different with sentiment all round very positive and things expected to happen.’’

He added: ``The IPO comes at an ideal time. With the conclusion of the conflict and the anticipated resurgence of the local economy, fund managers and investors are displaying renewed interest in the Sri Lankan equity market.’’

Spokesman for the promoters, Namal and Acuity, were confident that the necessary permission will be granted and foreigners will be able to invest in the fund just as they do in the stock market.

Namal, the country’s pioneering unit trust set up 18 years ago, has in the past two years giving its investors a 20% return. Its average return has been around 15%.

Mr. Ray Abeywardene, CEO of Acuity Partners, explained that the managers of the new fund could make their investments unfettered by the risk of early redemption. If fully subscribed, they had the billion rupees to invest as they thought fit during the 10-year lifetime of the fund.

``Therefore the potential returns are higher,’’ he said.