Fund Power

June 19, 2007 (LBO) – Institutional investors in Sri Lanka’s small stock market still lack the strength to influence managements of listed firms on issues like corporate governance, a top fund manager said. Unit trusts or mutual funds still hold only a small slice of the equities on the Colombo bourse, according to S. Jeyavarman, chief executive of National Asset Management Ltd (NAMAL).

Market analysts have long maintained that institutional investors like unit trusts have not done enough to make their voices heard in companies where they have stakes.

This is in contrast to more developed capital markets where such investors carry more clout with corporate boardrooms.

Jeyavarman acknowledged that funds had not been active enough on corporate governance issues but said this was because their fund base was still too small.

“It’s true we ourselves have not used our strength,” he said in an interview. “One of the reasons is that our fund base is not enough for us to attempt to generate a lot of noise.”

Unit trusts have a total fund size of only around 5.4 billion rupees and the funds invested in equities make up only about 3.2 percent of the roughly 850 billion rupee market capitalizat