He says the firm will initially invest 20 million US dollars in two rounds. The fund itself is planning a listing which could be as early as next year.

"We are looking at taking the investment company to the public with a time frame not exceeding one year," LR Global Lanka Asset Management chief executive Channa de Silva said.

"LR Global is committed to build Sri Lanka's best asset management unit in the country handling listed and unlisted equity."

LaGuardia says the firm will buy into companies that give the best risk-return and the fund itself will list on the market.

"We want to start on it small and build on it as a qualitative investment," LaGuardia said.

"After that I will allow the listing of the investment company on the Colombo Stock Exchange."

High valuations of companies have also renewed interest in initial public offerings (IPOs). Earlier this month a stock offer by Odel, a fashion retailer was oversubscribed by 63 times.

"We are also keenly interested to promote fair amount of IPOs in the medium to short term through investing in unlisted companies which have potential to list and eventually bringing them onto the stock market," de Silva said.

Allen J Pathmarajah, chairman of the Sri Lanka unit said political stability, growth potential and strong management in Sri Lankan companies were pluses.

With improved monetary policy Sri Lanka is enjoying lower inflation and interest rates. If fiscal policy also improves sustained lower interest rates could bring more capital to equity markets from high yield government bonds.

The company has already opened its offices at the World Trade Centre building in Colombo, and has recruited 10 employees. LR Global has 41 employees in the South Asia region, Pathmarajah said.

In 2008, LR Global opened its first south Asian operation in Bangladesh.

"We have committed a capital of 170 million dollars for our Bangladesh operations and have already deployed 45 million dollars," LaGuardia said.

The investment company has offices in Singapore, Vietnam, Thailand, Cambodia and Papua New Guinea , he said.

La Guardia says the Sri Lanka unit may be used as a regional office in the future.

Updated