Equities Foray

Aug 18, 2010 (LBO) – Sri Lanka’s Central Bank said a pension fund it manages would increase exposure to equities as government paper, in which it has invested the bulk of money, become less attractive with falling interest rates. The bank said the Employees’ Provident Fund, the biggest fund in the country, has authority to make investments in the share market, including the banking and financial sector.

It was responding to criticism over the EPF’s recent forays in the share market and building up of stakes in listed companies including banks.

One of the criticisms was that there was a conflict of interest in the fund buying stakes in commercial banks as the EPF is managed by the central bank which is also the banking regulator.

The Central Bank said in a statement the claims were “misleading” and that the law allows it to make investments in shares including the banking and financial sectors.

The banking and financial sector is the largest sector in the Sri Lankan equity market with more 20 percent of the total market capitalization.

“This sector has always been performing exceptionally well and therefore, since 2005, the EPF had invested in the sector with the intention of creating more wealth for