Sri Lanka fund manager hopes to target wider base

Oct 04, 2011 (LBO) – A newly-licensed start up fund manager says it is expecting to bring in potential investors who lack the knowledge and experience of English speaking Colombo-based investors to enter equity markets, officials said.

Dhammika Herath, chairman of First Class International Funds, says the Securities and Exchange Commission licensed the firm as a fund manager.

He had started trading in the market about nine years ago, but later learned investment guidelines from seasoned players.

“Earlier we were making some losses and profits, it was like that,” Herath said, at a soft launch of his company.

“By getting all these guidelines from these exceptional individuals we turned all these losses to profits.”

Sarath Rajapaksha, director of Capital Trust Securities says in Sri Lanka too few people invested in equities. He says people like Herath can bring new investors to equities.

“That is the type of people we need,” Rajapaksha told the launch forum. “People who can go to grassroots level, approach people and talk to them in their language – Sinhala or Tamil. And get them in to the market.

“How many people in Sri Lanka can speak English? Is this market only for English speaking people?”

Rajapaksha says all stock quotes and research reports were in English.

Herath said in 2008, he had started to attract funds from friends who wanted him to invest in the market.

In late 2008, he said his company had bought into the market during a dip, when even foreign funds like Galleon were selling out of the market.

With the end of a war in 2009, Sri Lanka’s stocks boomed sometimes doubling a year. But the market is now going through a correction.

To attract a wider range of investors, Herath said he had obtained a license from the Securities and Exchange Commission. The SEC had wanted to regulate his company and he had eventually got the license a few weeks ago, he said.

Herath says Sri Lanka’s inflation is low, interest rates are low and economic growth is high and unemployment rate in Sri Lanka is lower than in Europe and the country has a lot to offer.

Sri Lanka however is now in the middle of an episode of peg defence and balance of payments pressure.

Herath says his firm will also target foreign funds, and there are inquiries.

The firm expects to formally launch operations in mid October. It will strike a deal where a performance fee is based on an agreed benchmark return with clients on an agreed period.

In general, a person who wants a higher return will have to bear a higher risk. Hedge funds for example use leveraging. In developed markets relatively less risky investments such as mutual funds are not allowed to leverage.