State sector retirement funds like the Employees Provident Fund (EPF) and the Employees Trust Fund (ETF) as well as the Sri Lanka Insurance Corporation (SLIC) now back under government controlled plans more aggressive equity investment in privately run firms without participating in their management, Central Bank Governor Nivard Cabraal said yesterday.
Markets buzzed with rumours that state funds had made significant investments on the Colombo stock market last week with NDB Stock Brokers announcing that it had on behalf of the Employees Provident Fund purchased 4.6 million shares of Lighthouse Hotels amounting to 10% of the company. A price of Rs. 60.50 per share was paid on this deal, down sharply from the previously ruling price of slightly over Rs. 80.
Brokers said that Hayleys had sold out their 27% stake of Lighthouse, owned through Carbotels, a subsidiary of Haycarb, while the MJF Group is also known to have shed its 12.5% while Mercantile Investments had slightly increased its 11% to 13.5%.
There were rumours but no confirmation of other state sector entities including the ETF and possibly the Bank of Ceylon Pension Fund acquiring a stake in the popular south coast hotel just outside Galle.
``There’s been a lot of talk over the years of state-controlled funds investing in equities but nothing very much has happened,’’ Cabraal said. ``With prospects for investment in Treasury instruments (bills and bonds) falling in the next two or three years, that’s going to change.’’
He declined to reveal how much of state-controlled funds will be invested in quoted equities saying this was sensitive information but indicated that these funds will be ``building a portfolio of strategic investments.’’
``We are not interested in taking management control,’’ he said. ``What we are interested is in good management, good returns and good capital gains.’’
While the EPF and ETF has been an equity investor, such investments have in the past been only a minute fraction of their resources. SLIC however has over the years built up a valuable portfolio of quote0 stock.