At best of times, managing investments is fraught with risks. Hence, the best investment managers have a well-articulated investment philosophy, a deeply entrenched set of values and strong discipline. It is that which allows investment managers to navigate risks, deliver sustainable returns and respect clients’ primacy.
LYNEAR Wealth Management, managing $190 million in assets, is a firm that has thrived in Sri Lanka, a market defined by uncertainty, chaos and frequent crises, by a commitment to such standards.
A Fundamental Need is Addressed
LYNEAR Wealth Management emerged to address a crucial gap: the need for an independent wealth manager offering bespoke solutions backed by robust research to help investors preserve and grow their wealth in a market characterized by uncertainty and frequent economic crises. LYNEAR’s Sanjay Kulatunga, Chief Executive and Co-founder, Dr Naveen Gunawardane, Managing Director and Co-founder, Ramali Perera, Head of Fixed Income, and Asanka Herath, Head of Equities, spoke to Echelon about the values that define their purpose, and drive their success.
Founded in 2013, LYNEAR set out to emulate the successful wealth management models of developed markets like Singapore, providing tailored solutions to institutions and high-net-worth individuals while maintaining a client-first ethos.
At the time, the wealth management industry in Sri Lanka was nascent, dominated by stockbrokers and unit trust products often plagued by conflicts of interest. Unlike its competitors, LYNEAR chose not to offer stock broking or primary dealing or its own financial products to go with wealth management, ensuring complete independence and prioritizing clients’ interests. This independence became a cornerstone of their approach, rapidly establishing LYNEAR’s reputation for integrity and a client-first mentality. As a result, institutional investors from both local and international markets were drawn to LYNEAR, recognizing the firm as a trustworthy partner. A significant achievement was managing the Sri Lankan equity portfolio for one of the world’s largest sovereign wealth funds, highlighting LYNEAR’s capability to cater to sophisticated investors.
LYNEAR further distinguished itself by offering ancillary investment services, assisting clients with property purchases, evaluating private equity opportunities and acting as advisor for private businesses. This multi-family office approach is unique in Sri Lanka, providing comprehensive bespoke management of significant portions of clients’ wealth, which at times requires LYNEAR to collaborate with tax consultants, lawyers, and other professionals. This quickly established LYNEAR as the trusted advisor for some of the ultra-high-net-worth individuals and families in Sri Lanka.
In 2022, LYNEAR expanded into the mutual fund market, positioning its offerings as a wealth management service targeting the affluent clientele. LYNEAR believes that clients will benefit by approaching LYNEAR’s portfolio of unit trusts as a private wealth management solution, instead of focusing separately on each of the funds.
They also ventured into private equity advisory, focusing on large buy-side transactions. This expansion was a natural growth area given their multi-family office clients have long enjoyed their advice in private equity transactions.
Another key milestone in LYNEAR’s journey was the addition of Dr Indrajit Coomaraswamy, the former Governor of the Central Bank of Sri Lanka, to the Board of Directors in 2020. His expertise and reputation significantly enhanced LYNEAR’s profile.
Over the years, its reputation grew organically through word-of-mouth and client referrals. It was only recently that they even established a LinkedIn presence and a proper website to support their broader wealth management offerings. This organic growth strategy highlighted the quality and reliability of LYNEAR’s services, attracting high-calibre clients and professionals to their fold.
Unique, Tried-and-Tested
One of the founding principles of LYNEAR was to address the trust deficit in the investment management space. Establishing transparency in transactions and clear fee structures was essential to maintaining client trust. The founders emphasized the ongoing importance of staying above the trust deficit, noting that while it has always been a part of the investment landscape, LYNEAR’s commitment to transparency helps build deeper, more trusting relationships with clients. Unlike other firms with interests in multiple financial sectors, LYNEAR’s sole focus on the client allowed for an authentic relationship free of conflicts of interest.
LYNEAR’s approach to wealth management is deeply personalized. In their multi-family office, they manage each high-net-worth individual or family unit separately, developing personalized investment policy statements. This bespoke approach ensures that clients receive tailored advice and comprehensive wealth management services. LYNEAR’s role often extends beyond managing funds to providing consolidated reporting and comprehensive advisory services.
For LYNEAR, success is not just measured by industry standards but by their unwavering commitment to doing right by their clients. Despite the myriad challenges of the past decade, including bombings, the COVID-19 pandemic, and the debt default-induced economic crisis, LYNEAR has built a solid platform rooted in maintaining client trust and ensuring alignment with clients’ risk appetites. In some instances, LYNEAR has even gracefully declined to manage certain funds and individuals whose interests did not align with their core principles, demonstrating their steadfast adherence to their values. This commitment is reflected in the loyalty of their longstanding clients.
Sharp Focus
The last five years, marked by significant economic challenges, have underscored the importance of discipline in wealth management. LYNEAR’s diligent approach and disciplined strategy have helped clients navigate uncertain times without succumbing to the temptation of high-risk, high-return investments that could jeopardize their wealth. “We are not among the high risk-taking fund managers in the market. Most often we are conservative in our thinking,” explains LYNEAR’s Chief Executive and Co-founder Sanjay Kulatunga. This cautious stance has been particularly beneficial during crises, where clients have increasingly sought their trust and expertise. LYNEAR’s disciplined approach emphasizes not getting distracted by market noise and maintaining a balanced asset allocation. “During crises, the key thing we emphasize to our clients in our discussions with them is not to get distracted by the noise. Particularly during times of crisis, even now there’s a lot of noise. Don’t go too aggressively into one particular asset class over the other,” noted Kulatunga.
Managing client expectations and maintaining discipline are integral to LYNEAR’s philosophy. Most of their portfolios are discretionary, meaning they manage the investments within agreed parameters, allowing clients to rely heavily on LYNEAR’s expertise. Regular communication with clients ensures they are informed about market developments, portfolio changes, and future strategies. “We make that decision, so the client doesn’t have to get involved in that decision-making process, because what we buy or sell, all of that lies with us,” explains Managing Director and Co-founder Dr Naveen Gunawardane. This level of trust allows clients to have peace of mind, knowing that LYNEAR is making informed decisions on their behalf.
LYNEAR places significant emphasis on client engagement, steering away from short-term transactional thinking. Their focus on long-term wealth preservation often involves guiding clients through disciplined investment strategies, even when it means resisting popular but potentially risky market trends. The respect and trust earned from clients over the years are a testament to LYNEAR’s steadfast adherence to its values. “Advising the clients on why they need to stay disciplined is a core message we try to deliver,” says Asanka Herath, Head of Equities at LYNEAR. “And that means we have to stick by our convictions, and not compromise our values.”
Deep Insights
A key differentiator for LYNEAR is its strong foundation in research. They boast one of the largest and most experienced investment teams in Sri Lanka, with dedicated equity, credit and macro research analysts. This in-house expertise allows them to conduct thorough bottom-up research, enabling informed and timely investment decisions.
The team’s capability was particularly evident during crises like the Covid lockdown in 2020. LYNEAR quickly mobilized its team to assess the impact of the government-introduced debt moratorium and cessation of economic activities on the credit quality of companies. “We were able to look through all our issuers, figure out which companies could withstand that level of interruption to cashflows, and which finance companies had access to banks or other sources of funding,” explained Ramali Perera, who heads fixed income at LYNEAR.
LYNEAR’s equity investment philosophy centres around value investing with a catalyst, focusing on great businesses that are undervalued, but are likely to have catalysts that will result in the market realizing their true value. A philosophy that has been visible during crises, when LYNEAR picked up shares of robust companies at deep discounts. On 11th May 2020, amidst all the chaos of a market day that lasted only minutes, LYNEAR were net buyers building exposure to an export company at a more than 50% discount to the previously traded price. This disciplined approach has built client trust through the multiple crises the country has witnessed over the years. The key for this is “You need to be able to tell investors what they don’t want to hear and be firm about your convictions,” Herath said.
Regarding the ongoing debt restructuring and agreements with bilateral and ISB (International Sovereign Bonds) holders, LYNEAR’s team emphasized the importance of sticking to the IMF path towards structural reforms and debt sustainability. They noted that moving out of restricted default status and gaining market access is crucial for the country’s financial health. “Broadly speaking, whatever the election outcome is, it’s imperative that we stick to this IMF programme,” Dr Gunawardane opines.
From a macroeconomic perspective, LYNEAR anticipates a gradual recovery, with private-sector credit growth picking up and a more stable currency over the next few years. However, they also warned that deviating from the reform package could be disastrous, potentially leading to the loss of bilateral and multilateral funding. In the fixed-income market, LYNEAR expects opportunities to arise once the debt agreements are signed and the rating upgrade happens. This would attract foreign funds to the local rupee securities market, improving liquidity and being positive for rates. “Initially rates will come off a bit with foreign funds coming into the market, which will be positive for the bonds, however with higher credit growth we expect rates to move up later in the year” Perera explains.
On the equity side, the market’s future performance will depend on continued adherence to disciplined monetary and fiscal policies. If the market perceives that these policies will continue, the risk premium currently baked into low market valuations will reduce, leading to higher market levels. “For the market to move up, whether the subsequent government which comes into power is going to be committed to the monetary and fiscal policy discipline is critical,” Herath noted.
LYNEAR’s approach to mutual funds is also tailored to meet clients’ long-term investment needs. Unlike many competitors who focus on money market funds, LYNEAR initially launched a longer-term fixed-income fund and an equity fund. These funds have grown faster than expected, indicating strong client interest. LYNEAR plans to introduce a money market fund primarily for liquidity management, offering clients a comprehensive wealth management solution. “We are wealth managers and not fund managers,” explains Kulatunga. LYNEAR’s funds are part of a broader strategy to provide tailored investment solutions based on clients’ overall wealth and risk/return appetite. This approach reflects their commitment to offering a private wealth management solution rather than merely selling individual funds.
Governance
Investing in a market like Sri Lanka can be exhilarating, but frequent crises and policy uncertainty can create frustrations. The recent debt default and economic breakdown, with disruptions to fuel, electricity, and essential supplies, leading to unrest and sometimes violent protests, have left investors and individuals worried about preserving their wealth and committing their savings to productive use. That’s where LYNEAR steps in.
LYNEAR’s rigorous investment process is crafted by a team of professionals with extensive global and local experience, grounded in its values of integrity, drive, rigour, innovation, and respect. Its research team and portfolio managers meticulously analyse economic and industry trends, screening stocks for value, growth, and quality, before conducting in-depth research into selected securities.
Integrity is a core value at LYNEAR which has a meticulous governance structure to ensure that its clients’ interests are always paramount, benchmarking against international best practices and complying with financial market codes of ethics and Sri Lankan regulations. LYNEAR has an investment committee that regularly reviews investments to ensure they align with clients’ mandates and our investment philosophy, confirming fair treatment across all clients. LYNEAR also complies with the CFA Institute Asset Manager Code of Professional Conduct, a credible and respected code worldwide.
LYNEAR’s leadership team comes from diverse educational and professional backgrounds, contributing to a unique perspective in managing investments. The founders emphasized the importance of hiring people who think outside the box and are curious. “Investment theses are not built on financial statements. You should be able to see linkages across those abstract concepts out there and build an investment thesis,” Dr Gunawardane explained. The flat organizational structure at LYNEAR encourages everyone, from interns to seniors to contribute ideas and question decisions. This collaborative environment fosters intellectual rigour and ensures that LYNEAR helps investors unlock opportunities to preserve and grow their wealth.
Reflecting on their journey, LYNEAR’s founders are optimistic about the future, provided that Sri Lanka continues with the necessary reforms. The firm remains committed to maintaining the highest standards of integrity, transparency, and client-first service, guiding its clients through both stable and turbulent times with their interests at heart, and ethos that can potentially shape Sri Lanka’s capital market.