Promoting pooled funds: CFA Capital Market Awards propel unit trust fund management to the forefront

As the ninth annual CFA Capital Market Awards scheduled for 29 June 2022 draws nearer, CFA Society Sri Lanka takes the opportunity to review the award winners from last year, as it continues to recognise and reward professionals who have established benchmarks for the advancement of domestic capital market participants.

The Best Unit Trust Fund Award is among five major accolades presented at the CFA Capital Market Awards, with the objective of recognizing and rewarding fund management companies that place unit holders’ interests first, promote better compliance and transparency for investors, and encourage the adoption of best practices in asset management. JB Vantage Value Equity Fund was conferred the title of Best Unit Trust Fund at the 2021 CFA Capital Market Awards.

Sri Lanka is deemed to have made an early foray into the unit trust industry, which originated in the country in the early 90s with four major players in the market. The industry has since grown from just 6 unit trust management companies in 2010 with assets under management (AUM) of LKR 23 billion, to 16 unit trust management companies with LKR 198.5 billion in AUM by end-2021.

The past decade has seen unit trusts come to the very forefront, set against a backdrop of improved financial literacy around the industry, more knowledgeable fund managers and better reporting.

Christine Dias Bandaranaike, CEO and Portfolio Manager at JB Financial, comments: “Over the last 10 years, there has been a much greater increase in the number of firms in the industry offering unit trusts in Sri Lanka, the number of funds available and the level of competition in delivering returns to investors.”

JB Financial entered the space in 2011, and is also the first and so far only unit trust manager in the country to be Global Investment Performance Standards (GIPS) compliant. Created by CFA Institute, GIPS refer to a set of voluntary standards used by investment managers throughout the world to ensure the full disclosure and fair representation of their investment performance. The goal of the standards is to make it possible for investors to compare one firm’s performance against that of another firm.

Dias Bandaranaike affirms: “With the senior management of JB Financial themselves being CFA charterholders, we always believed that it was important to demonstrate the level of importance that we placed on ethics and standards by complying with the best international practices.”

She also notes that the CFA Society has played an active role in striving to improve governance, particularly with regard to corporate reporting, disclosures and the external relations companies maintain with investors in the market.

Spotlight on CFA Capital Market Awards

The JB Financial team’s triumph at the CFA Capital Market Awards – on three occasions including in 2021 – is a reflection of its belief that apart from providing sound returns to investors, going the extra mile with transparency, governance and the like, enabled it to win Gold in the Best Unit Trust Fund category.

Dias Bandaranaike explains that “the annual CFA Capital Market Awards offers firms an opportunity to be introspective, to look at what we are doing right and what we can improve; it provides those who participate with an incentive to strive to be better.”

Speaking of how receiving the award has helped the organisation, she remarks: “It is encouraging to know that someone appreciates what we’re doing, and it’s boosted the morale of our team. We celebrate the achievement internally as well, as it’s something that we all individually worked towards accomplishing.”

The JB Financial view is that the awards have helped improve the overall standards of the capital markets industry, particularly in regards to the quality of reporting.

To this end, Dias Bandaranaike points out that “compared to research reports from 10 years ago, both the number of reports and their level of depth have improved significantly. On the corporate side, listed companies understand the importance of having good investor relations, and why they should speak to brokerages/research firms.”

She concludes by identifying areas where CFA can do more to improve the standards of the unit trust industry: “Globally, pooled funds, whether in the form of unit trusts or mutual funds, have prospered due to being tied to two elements: the retirement savings industry and some form of tax sheltering. But in Sri Lanka, we have neither. This is something that CFA Sri Lanka must advocate for, where there is a locked retirement planning system in place.”