What Is a Unit Trust Fund and How Does It Work?
A plain-English breakdown of how unit trusts pool your money, what NAV means, and why it matters for regular Sri Lankans.
A Unit Trust Fund (UTF) — legally known as a Collective Investment Scheme in Sri Lanka — is a financial structure where thousands of individual investors pool their money into one massive central fund.
Instead of trying to buy complex financial assets entirely on your own (which often requires millions of rupees), your pooled cash gives you institutional buying power.
The Mechanics of "Units" and "NAV"
When you put money into a Unit Trust, you do not directly own the underlying stocks or government bonds. Instead, your money buys Units of the fund. You become a Unitholder.
Net Asset Value (NAV): This is the total market value of all the assets inside the fund, minus any operational expenses. It is calculated at the end of every single business day.
Unit Price: The daily value of a single unit is determined by dividing the total NAV by the number of units currently held by investors.
If the value of the assets inside the fund goes up, the NAV goes up, and your unit price increases. You make money either when the unit price appreciates (capital growth) or when the fund distributes profits directly to you (dividends).
This article is for educational purposes only and does not constitute investment advice. Please consult a licensed financial advisor before making investment decisions.