Sri Lanka gilt edged funds approved as liquid assets for banks

May 21, 2013 (LBO) – Sri Lanka’s Central Bank which regulates banks and finance companies had allowed mutual funds that invest in government debt to be considered liquid assets, the Securities and Exchange Commission said. The move will allow mutual funds invested in gilts or gilt unit trusts to be bought by pension and provident funds, the SEC said.

The fund will have to be open ended invested in government securities and up to 90 percent of the fund can be treated as liquid assets.

In an open ended fund, the manager has to be prepared to sell new units or redeem old units at a marke-to-market valuation.

Mutual funds, especially those investing in equities, provide an avenue for unsophisticated investors to access capital markets, the SEC said. There is also a cost in terms of management fees.