The Securities and Exchange Commission of Sri Lanka (SEC) has introduced a new categorisation framework for unit trusts, requiring all managing companies and trustees of Collective Investment Schemes (CIS) to adopt a standardised structure for fund classification across the industry.
The directive, issued under Sections 16(c) and 16(d) of the Securities and Exchange Commission of Sri Lanka Act, No. 19 of 2021, received approval at the SEC’s 522nd meeting on September 16, 2025.
Under this framework, unit trusts will now be classified into seven categories—Growth, Balanced, Income, Money Market, Gilt, Index, and Sector Specific Schemes—each defined by distinct investment objectives and strategies.
- Growth Funds: Target medium-to-long-term capital appreciation, with at least 80% of net asset value (NAV) invested in equities.
- Balanced Funds: Seek both capital appreciation and periodic returns, maintaining a 60:40 split between equities and fixed income.
- Income Funds: Focus on regular income generation, with a minimum of 70% of NAV in fixed income instruments such as government securities, bonds, and debentures.
- Money Market Funds: Prioritise short-term returns and liquidity, investing at least 90% of NAV in money market instruments permitted under the CIS Code.
- Gilt Funds: Allocate a minimum of 80% of NAV to government securities, treasury bills, treasury bonds, and related repurchase agreements.
- Index Funds: Designed to replicate the performance of a chosen index, with at least 90% of NAV invested in securities linked to that index.
- Sector-Specific Schemes: Invest a minimum of 90% of NAV in a particular sector or industry to capture cyclical opportunities.
The directive takes effect from October 1, 2025, with all managing companies and CIS trustees required to achieve full compliance by April 2, 2026.
