Understanding unit trust “disclaimers”

IF you have seen a unit trust advertisement, you may have noticed a statement like this:

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“Yield is variable and subject to change. Past performance is not indicative of future performance. Investors are advised to read and understand the Key Investor Information Document (KIID).”

For many investors in Sri Lanka, this statement can sound confusing or even concerning. Some people may feel it is there to protect fund managers if something goes wrong, or that it means the investment needs careful consideration. In reality, this disclaimer exists to protect the investor, not the fund manager. Let's understand what it really means in simple terms.

Unit Trusts are market-linked investments. This means the money is invested in shares, Government securities, bonds, or other financial instruments whose values change with market conditions, interest rates, and the economy.

Because no one can control markets, the Securities and Exchange Commission of Sri Lanka does not allow any unit trust management company to promise fixed or guaranteed returns for unit trusts.

The disclaimer is therefore mandatory, and its purpose is to ensure investors are not misled or given unrealistic expectations.