NAMAL's Gilt Edge Fund IPO opens tomorrow
National Asset Management Ltd. (NAMAL) will offer Gilt Edge Fund, a
new investment fund for risk averse investors. The IPO of the Fund will
open tomorrow and will close on March 17.
CEO of NAMAL S. Jeyavarman said that the eight investment fund of
NAMAL has been designed with long experience of the company in the
market.
We have been in the market since 1991 and we find that most of our
investors are risk averse. Generally the public is more concerned about
the safety of the capital rather than the return on capital.
That is why they prefer savings and fixed deposits even at lower
interest rates, he said. Jeyavarman said that due to high inflation the
return from savings and fixed deposits is very low. The Gilt Edge Fund
will give an alternative for those investors.
The public can't go to the primary Treasury bill market and
investment in the secondary market is complicated and therefore this
market does not mature. The Gilt Edge Fund will facilitate people to
invest in government securities.
The fund will only invest in government securities; treasury bills,
treasury bonds and repurchasing agreements. This is a close ended
four-year fixed maturity fund. The Gilt Edge Fund will be a low fee
instrument with semi annual dividends.
NAMAL will offer Rs. 1 billion or 100 million-Rs. 10 units and the
fund management can decide to increase offering up to Rs. 1.5 billion if
the IPO is oversubscribed.
In addition to the security of the investment the instrument also
offers tax free returns to the investors. In other investments,
corporate investors have to pay 35% withholding tax on the return of the
investment.
Since the unit Trust funds are free of tax the instrument is ideal
for corporate customers, Analyst of NAMAL Ravi Amarasinghe said.
Investors cannot withdraw their investment but as the fund is listed
on the Colombo Stock Exchange the investors can encash their investment
prior to the maturity period of the fund. Jeyavarman said that the
ability of the fund to achieve its investment objectives will depend to
a greater extent on the overall performance of the economy.
Answering questions, Jeyavarman said that though the government is
running at trillions in debt government securities are still safe.
Governments can pay the capital back even by printing money.
He said that according to analysts inflation will go up in the next
two to three months mainly because the subsidies have been removed on
many items and the cost is being passed on to the consumer. However, the
situation will stabilise thereafter, he said.
The trustee and the custodian of the fund is HSBC while Ernst and
Young acts as the auditors.
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