Unit trust vs treasury bills in Sri Lanka
In short
Both give you exposure to Sri Lankan government paper. Buying bills directly means no management fee but managing maturities yourself and meeting the minimums for a direct purchase. A gilt or money market fund holds them on your behalf for an annual fee and can usually be redeemed on any business day rather than at maturity.
A treasury bill is a short-term debt instrument issued by the Government of Sri Lanka. You can buy them through a primary dealer, or you can hold them inside a unit trust, and the choice is mostly about administration rather than about what you are exposed to.
In both cases the credit you carry is the government’s. What differs is the fee, the minimum, and what happens when you want the money before the bill matures.
Side by side
What each one actually is, rather than what each returned.
| Gilt or money market fund | Treasury bills, bought directly | |
|---|---|---|
| Credit you carry | Government of Sri Lanka | Government of Sri Lanka |
| Cost | Annual management fee | No management fee; dealer spread applies |
| Minimum | Set by the fund, often modest | Set by the primary dealer, typically higher |
| Managing maturities | The fund reinvests as bills mature | You do it yourself |
| Getting money out early | Redeem units on a business day | Sell in the secondary market at prevailing prices |
| Diversification of maturities | The fund holds a spread | Whatever you bought |
The exposure is the same; the administration is not
Holding a 12-month bill directly and holding a gilt fund that holds 12-month bills leave you exposed to the same issuer at broadly the same yields — as at 25 August 2026 the 12-month bill yielded 9.67% and the 3-month 9.06%. The fund charges a fee for doing the work: buying at auction or in the secondary market, reinvesting as bills mature, and standing ready to redeem your units on any business day.
Where the fund earns its fee, and where it does not
- It reinvests maturing bills without you having to act, which for a rolling holding is the bulk of the work.
- It lets you redeem on a business day instead of waiting for a maturity or selling in the secondary market yourself.
- It gives access at a much lower minimum than a direct purchase typically requires.
- It does not improve the credit: you carry the same government exposure either way.
- It does not remove interest rate risk: a fund holding longer bills still falls in value when yields rise.
Gilt funds are not all the same
A fund holding 30-day bills behaves very differently from one holding long treasury bonds, even though both may be described as gilt funds. The maturity profile is in the manager’s factsheet and it explains nearly all of the difference in how much the price moves. Our volatility figure measures that difference directly from daily prices.
Tax
Tax treatment differs between deposits and unit trusts in Sri Lanka, and it has changed more than once in recent years. We do not publish tax rates here, because a rate that is wrong or out of date is worse than no rate at all on a page people may act on. Check the current position with the Inland Revenue Department or a qualified tax adviser, and ask the fund manager how distributions from the specific fund are treated before you assume.
What this page does not do
It does not tell you which of the two to choose. That depends on when you need the money, what else you hold, your tax position and how you would feel if the value fell, none of which we know. CeylonFunds is not a licensed investment adviser and does not provide investment advice. What this page can do is state precisely what each instrument promises and what it does not, so that the comparison you make is between the right two things.
Common questions
Is a gilt fund the same as buying treasury bills?
The exposure is the same — Government of Sri Lanka credit — but the fund charges a management fee, handles reinvestment as bills mature, and lets you redeem on a business day rather than waiting for maturity or selling in the secondary market. Buying directly avoids the fee and requires you to do that work and meet a dealer’s minimum.
Can a gilt fund lose money?
Yes. Government paper still reprices when yields move, so a fund holding it falls in value when yields rise, more so the longer the maturities it holds. Carrying government credit is not the same as carrying no risk.
What is the minimum to buy treasury bills in Sri Lanka?
It is set by the primary dealer you buy through and is typically well above the minimum for a unit trust. The funds we track publish their own minimums on every fund page, and our lowest-minimum ranking lists them in order.
This is general information about how two kinds of product differ. It is not advice about your circumstances, CeylonFunds is not a licensed investment adviser, and we do not publish bank deposit rates. Central Bank figures quoted are as at 25 August 2026. Past performance is not indicative of future results.
Related
Daily unit prices published by the Unit Trust Association of Sri Lanka (utasl.lk). Performance figures as published by the respective fund managers.