Upholding unitholder interests: CFA Society Sri Lanka Capital Market Awards prompt greater assurance from unit trust funds

As the 10th annual CFA Society Sri Lanka Capital Market Awards scheduled for 21 June 2023 draws closer, the Society takes the opportunity to revisit the award winners from last year, as part of its efforts to recognise and reward professionals who have established benchmarks for the advancement of domestic capital market participants.

The Best Unit Trust Fund Award is one of the five major accolades presented at the CFA Society Sri Lanka Capital Market Awards. Its objective is to recognize and reward fund management companies that place unitholders’ interests first, promote better compliance and transparency for investors, and encourage the adoption of best practices in asset management. The title of Best Unit Trust Fund was conferred upon the Senfin Money Market Fund at the 2022 awards.

Spotlight on CFA Society Sri Lanka Capital Market Awards

Senfin Money Market Fund’s triumph at the 2022 awards was primarily attributed to it adopting a minimal risk strategy due to the very challenging and risky macroeconomic conditions at the time. Additionally, the unit trust boasts a set of strict guidelines internally (over and above Securities and Exchange Commission of Sri Lanka (SEC) guidelines) on limiting investment exposure to any one group or group of companies, thereby mitigating concentration/single entity risk.

Senfin Money Market Fund also increased the transparency of data and disclosures to investors, in addition to launching a fully-fledged online platform where clients could have quicker access to their portfolios as well as invest and redeem units more readily and much faster.

“The fund’s assets were consciously moved to investments of an A rating or higher, where preservation of investor capital was given the highest priority. Furthermore, we believe that the fund’s ability to manage liquidity exceptionally well, where even large redemptions were accommodated on a T+1 basis, helped secure the top spot in the Best Unit Trust Fund category,” states Jeevan Sukumaran, the Chief Executive Officer of Senfin Asset Management.

Sukumaran remarks that winning the award has helped boost morale within the organisation and motivated the team to continue to improve themselves, whilst also strengthening the external brand proposition of being a trusted, recognised and dependable partner for a client’s investment journey.

Unit trust evolution spurred by tech adoption

Over the past decade, the unit trust industry has witnessed notable changes, with the use of technology taking precedence in its more recent evolution. Although the unit trust industry may have lagged behind the rest of the capital markets industry with many of its functions being paper-based, the COVID-19 pandemic compelled it to move to online platforms. Therefore, clients are now able to carry out a multitude of tasks, ranging from opening accounts to redemptions and transfers, online.

The types of funds have also grown over the last 10 years. In the past, unit trusts were focused mainly on equity-based funds with some money market funds, but today, there is a wide range of funds including index, income and gilt varieties.

He also believes that there are now far more SEC regulations and compliance requirements, which in turn have helped improve industry standards, accountability, compliance and governance.

Commenting on the importance of maintaining a high level of disclosure standards, compliance processes and governance practices in the unit trust industry, Sukumaran says it is necessary to be compliant as regulators are constantly updating and revamping regulations for the industry.

Speaking of CFA’s contribution to the industry, Sukumaran points out: “CFA has always been a strong advocate in the continuous development of best practices globally within the broader capital market industry. Starting from syllabus content to governance, consultancy and standards, CFA’s involvement has continually benefitted capital markets in Sri Lanka”.

Moreover, Sukumaran notes that CFA is in active collaboration with regulators, which helps bring global standards to the local industry. He reveals that as of 31 March 2023, Senfin Asset Management is compliant with Global Investment Performance Standards (GIPS), making it only the second company in the industry to accomplish the same. Senfin claims compliance with the CFA Asset Manager Code™ as well, which it believes further strengthens the company’s value proposition.

The CEO of Senfin Asset Management believes that there is great value in the industry having CFA-qualified people, given that CFA instills best practices in charterholders, which in turn will be carried into their organisations, thereby ensuring that companies have strong principles and governance from within.

He adds: “When hiring CFA charterholders, you know you are getting people who self-regulate to the highest standards, and this, in turn, helps the company at all levels.”

CFA Institute is the global association of investment professionals that sets the standard for professional excellence and credentials. Founded in 2001, the CFA Society of Sri Lanka is a not-for-profit organisation supporting the professional development and advancement of CFA Charterholders and candidates in Sri Lanka. Its membership of over 275 members consists of CEOs, CFOs, portfolio managers, equity analysts, banking professionals, investment advisors, and other senior-ranking financial practitioners and over 260 candidates, mainly in the financial sector.