CAM Managing Director Dulindra Fernando said the fund expects to draw foreign investors with a target return of over 4 percent a year.
Fernando said the dollar asset fund will be a first step for Sri Lanka based firms to manage foreign funds, as in other financial centres like Singapore is doing.
The Ceylon Dollar Bond Fund has been rate 'BB-' by Fitch Ratings with most of the fund expected to be invested in Sri Lanka sovereign debt.
Director Michael Preiss said the expansion of financial products will deepen capital markets and help the economy grow and develop a financial market that also serves foreign investors.
Foreign investment funds, foreign passport holder and Board of Investment approved companies in Sri Lanka will be able to invest in the fund.
The fund has been licensed by Sri Lanka's Securities and Exchange Commission.
SEC Chairman Nalaka Godahewa said the fund will help expand Sri Lanka capital market products beyond rupees, giving an investment opportunity in another currency for foreign investors.
The fund will have a minimum investment of 1,000 US dollars which managers hope will be a draw for the Sri Lankan diaspora abroad.
SEC market development consultant said Rohan Seneviratne said the smaller ticket size will allow smaller investors to access Sri Lanka dollar debt.
The minimum investment needed to buy Sri Lanka sovereign bonds traded in Singapore was about 200,000 dollars.
The open-ended fund could be withdrawn at any time giving liquidity, Preiss said.
The dollar fund will also give protection against currency depreciation.
Deutsche Bank will be the trustee.
In addition to 5 and 10 year sovereign bonds, Sri Lanka's state-run Bank of Ceylon, National Savings Bank and listed DFCC Bank have issued bond traded in international markets.
SriLankan Airlines has also sold bonds with a sovereign guarantee.