NAMAL Flexi Income Fund - better returns for investors

The first close ended fund in Sri Lanka, the NAMAL Flexi Income Fund (NFIF) pays quarterly dividends to investors as proposed in its initial offer in March 2007, a media release from the National Asset Management Limited (NAMAL) said.

With a two-year duration and part capital redemption features, NFIF paid two dividends of Rs 0.43 and 0.46 in 2007 and four dividends of Rs 0.40, 0.46, 0.48 and 0.45 in 2008 and one dividend of Rs 0.41 in 2009. This scheme will be retired in March 2009, the release said.

“Being a pioneer Unit Trust Manager we created this fund to essentially invest in corporate papers and trust certificates to generate these market interest rates with a tax advantage to corporate investors.

This scheme also provides an opportunity to individual investors to participate in the corporate debt market said Chief Executive Officer of NAMAL, S. Jeyavarman. “We have managed this fund prudently selecting investments to yield better returns over the prevailing Treasury bill yield thus achieving an annual compound return for the period up to January 30, 2009 of 17.9% and the tax effective return of 27.7 %,” he said.

The uptrend in interest rates since the launch of NFIF has helped us to deliver an increased return to the investors than expected. When the fund was launched the one-year Treasury bill rate was around 14.5% and this rate peaked at 19.96% in December 2007 and declined thereafter.

We think the current limited bank credit to the corporate sector would increase the appetite for the corporate to seek funds more from the capital market instruments such as debenture, commercial paper and trust certificates.

A fund of this nature can match the investor need with that of the corporate borrower.

“Currently the interest rates seem on its decline and our Flexi scheme can provide the opportunity for investors to lock in their capital for a fixed period to generate better returns compared to other forms of savings,” he said.