As per the Capital Markets Authority (CMA) Quarterly Statistical Bulletin-Q2’2022, Unit Trusts’ Assets under Management grew by 4.5% to Kshs 140.7 bn as at the end of Q1’2022, from Kshs 134.7 bn recorded in FY’2021. The key takes outs from the performance of the Unit Trust Funds include;
- Assets Under Management:
Assets Under Management of the Unit Trust Funds have grown at a 5-year CAGR of 20.3% to Kshs 140.7 bn in Q1’2022, from Kshs 55.8 bn recorded in Q1’2017, as shown in the graph below:
- Approved Collective Investment Schemes:
According to the Capital Markets Authority, as at the end of Q1’2022, there were 30 approved Collective Investment Schemes in Kenya, making up 111 funds in total. Out of the 30 however, only 20 were active while 10 were inactive. The table below outlines the performance of the Collective Investment Schemes comparing Q1’2022 and FY’2021:
|
Assets Under Management (AUM) for the Approved Collective Investment Schemes |
||||||
|
No. |
Collective Investment Schemes |
FY’2021 AUM (Kshs mns) |
FY’2021 Market Share |
Q1’2022 AUM (Kshs mns) |
Q1’2022 Market Share |
AUM Growth FY'2021 –Q1'2022 |
|
1 |
CIC Asset Managers |
56,278.4 |
41.8% |
56,919.1 |
40.5% |
1.1% |
|
2 |
NCBA Unit Trust Scheme |
18,003.0 |
13.4% |
19,757.2 |
14.0% |
9.7% |
|
3 |
BRITAM |
14,573.3 |
10.8% |
14,527.8 |
10.3% |
(0.3%) |
|
4 |
ICEA Lion |
13,350.7 |
9.9% |
13,669.2 |
9.7% |
2.4% |
|
5 |
Sanlam Investments |
8,610.7 |
6.4% |
10,205.1 |
7.3% |
18.5% |
|
6 |
Old Mutual |
6,655.0 |
4.9% |
6,713.2 |
4.8% |
0.9% |
|
7 |
Co-op Trust Investment Services Limited |
2,801.0 |
2.1% |
3,294.8 |
2.3% |
17.6% |
|
8 |
Dry Associates |
3,054.4 |
2.3% |
3,215.7 |
2.3% |
5.3% |
|
9 |
Madison Asset Managers |
2,660.2 |
2.0% |
2,794.6 |
2.0% |
5.1% |
|
10 |
Nabo Capital (Centum) |
2,398.3 |
1.8% |
2,719.6 |
1.9% |
13.4% |
|
11 |
Zimele Asset Managers |
1,992.5 |
1.5% |
2,165.8 |
1.5% |
8.7% |
|
12 |
African Alliance Kenya |
1,788.4 |
1.3% |
1,822.1 |
1.3% |
1.9% |
|
13 |
Cytonn Asset Managers |
704.2 |
0.5% |
725.7 |
0.5% |
3.1% |
|
14 |
Apollo Asset Managers |
716.3 |
0.5% |
719.2 |
0.5% |
0.4% |
|
15 |
Genghis Capital |
558.5 |
0.4% |
593.5 |
0.4% |
6.3% |
|
16 |
ABSA Unit Trust Scheme |
- |
0.0% |
287.1 |
0.2% |
- |
|
17 |
Orient Collective Investment Scheme |
245.8 |
0.2% |
257.4 |
0.2% |
4.7% |
|
18 |
Equity Investment Bank |
246.4 |
0.2% |
249.6 |
0.2% |
1.3% |
|
19 |
Amana Capital |
30.7 |
0.0% |
29.5 |
0.0% |
(4.1%) |
|
20 |
Wanafunzi Investments |
0.6 |
0.0% |
0.7 |
0.0% |
10.5% |
|
21 |
Genghis Specialized Funds |
- |
- |
- |
- |
- |
|
22 |
Standard Investments Bank |
- |
- |
- |
- |
- |
|
23 |
Diaspora Unit Trust Scheme |
- |
- |
- |
- |
- |
|
24 |
Dyer and Blair Unit Trust Scheme |
- |
- |
- |
- |
- |
|
25 |
Jaza Unit Trust Fund |
- |
- |
- |
- |
- |
|
26 |
Masaru Unit Trust Fund |
- |
- |
- |
- |
- |
|
27 |
Adam Unit Trust Fund |
- |
- |
- |
- |
- |
|
28 |
First Ethical Opportunities Fund |
- |
- |
- |
- |
- |
|
29 |
Natbank Unit Trust Scheme |
- |
- |
- |
- |
- |
|
30 |
GenAfrica Unit Trust Scheme |
- |
- |
- |
- |
- |
|
|
Total |
134,668.5 |
100.0% |
140,667.0 |
100.0% |
4.5% |
Source: Capital Markets Authority Quarterly Statistical Bulletins
Key to note from the above table:
- Assets Under Management: CIC Unit Trust Scheme remained the largest overall Unit Trust Fund with an AUM of Kshs 56.9 bn in Q1’2022, from an AUM of Kshs 56.3 bn in FY’2021, translating to a 1.1% AUM growth,
- Market Share: CIC Unit Trust Scheme remained the largest overall Unit Trust with a market share of 40.5%, a 1.3% points decline from 41.8% in FY’2021. Key to note, the 1.3% points decline in market share was the highest recorded in Q1’2022,
- Growth: In terms of AUM growth, Sanlam Investments recorded the strongest growth of 18.5%, with its AUM increasing to Kshs 10.2 bn, from Kshs 8.6 bn in FY’2021 while Amana Unit Trust Fund recorded the largest decline, with its AUM declining by 4.1% to Kshs 29.5 mn in Q1’2022, from Kshs 30.7 mn in FY’2021. Notably, the decline was slower than the 77.3% decline recorded in FY’2021, pointing towards improving investor confidence,
- GenAfrica Unit Trust Scheme, Natbank Unit Trust Scheme, First Ethical Opportunities Fund, Adam Unit Trust Fund, Masaru Unit Trust Fund, Jaza Unit Trust Fund, Dyer and Blair Unit Trust Scheme, Diaspora Unit Trust Scheme, Standard Investments Bank, and Genghis Specialized Fund remained inactive as at the end of Q1’2022.
- Comparison with other markets and asset classes:
Unit Trust Funds’ assets recorded a q/q growth of 4.5% in Q1’2022, while the listed bank deposits recorded a growth of 9.5% over the same period.
Source: Central Bank of Kenya, Cytonn Research
According to the World Bank data, in well-functioning economies, businesses rely on bank funding for a mere 40.0%, with the larger percentage of 60.0% coming from the Capital markets. Closer home, the World Bank noted that businesses in Kenya relied on banks for 99.0% of their funding while less than 1.0% come from the capital markets. Notably, our Mutual Funds/UTFs to GDP ratio at 1.1% is still very low compared to an average of 56.3% amongst select global markets, indicating that we still have room to improve and enhance our capital markets. The chart below shows some countries’ mutual funds as a percentage of GDP:
Over the past 5 years, the UTFs AUM has grown at a CAGR of 20.3% to Kshs 140.7 bn in Q1’2022, from Kshs 55.8 bn recorded in Q1’2017. However, even at Kshs 140.7 bn, the industry is dwarfed by asset gatherers such as bank deposits at Kshs 4.4 tn and the pension industry at Kshs 1.5 tn as of the end of 2021. Below is a graph showing the sizes of different saving channels and capital market products in Kenya as at December 2021:
*Data as of December 2020
Source: CMA, RBA, CBK, SASRA Annual Reports and REITs Financial Statements
On a REITs to Market Cap Ratio, Kenya still has a lot of room for improvement. The listed REITs capitalization as a percentage of total market cap in Kenya stands at a paltry 0.1%, as compared to 2.2% in the US and 1.6% in South Africa, as of 29th July 2022. Below is a graph showing comparison of Kenya’s REITs to Market Cap Ratio to that of United States (US) and South Africa:
Source: Online research, Nairobi Securities Exchange (NSE)
In order to improve our Capital Markets and stimulate its growth, we recommend the following actions:
- Reduce the minimum investments to reasonable amounts: Currently, the minimum investment for sector specific funds is Kshs 1.0 mn, while that for Development REITS is currently at Kshs 5.0 mn. The high minimum initial and top up investments amounts are unreasonably high and as such, put off potential investors. According to the Kenya National Bureau of Statistics, 74.4% of all employees in the formal sector earn a median gross income of Kshs 50,000 or below per month. It therefore locks out a lot of potential investors. Additionally, these high amounts discriminate against most retail investors, giving them fewer investment choices. This is the key reason why the listed REITS to Market cap ratio for Kenya remains at 0.05% compared to South Africa’s at 1.5% and US at 3.0%,
- Allow for sector funds: Under the current capital markets regulations, UTFs are required to diversify. Consequently, one has to seek special dispensation in the form of sector funds such as a financial services fund, a technology fund or a Real Estate UTF fund. Regulations allowing unit holders to invest in sector funds would go a long way in expanding the scope of unit holders interested in investing,
- Eliminate conflicts of interest in the governance of capital markets and allow different services such as the opening up of Trustees to non-financial institutions: The capital markets regulations should foster a governance structure that is more responsive to both market participants and market growth. Specifically, restricting Trustees of Unit Trust Schemes to Banks only limits choices, especially given that banking markets and capital markets are in competition,
- Provide Support to Fund Managers: We are of the opinion that the regulator, CMA, needs to integrate market stabilization tools as part of the regulations/Act that will help Fund Managers meet fund obligations especially during times of distress such as mass withdrawals. We do commend and appreciate the regulator on its role in protecting investor interests. However, since Fund Managers also play a key role in the capital markets, the regulator should also be able to protect the brand image of various fund managers in the industry. This can be achieved by working together with industry players to resolve matters rather than alienating and publicly ostracizing industry players facing challenges as this may not particularly be in investors’ interest,
- Create increased competition in the market by encouraging different players to set up shop: Increased competition in capital markets will not only push Unit Trust Fund managers to provide higher returns for investors but will also eliminate conflicts of interest in markets and enhance the provision of innovative products and services, and,
- Improve fund transparency to provide investors with more information: Each Unit Trust Fund should be required to publish their portfolio holdings on a quarterly basis and make the information available to the public so as to enhance transparency for investors. Enhanced accountability by providing investors with more information will help both investors and prospects make better informed decisions and subsequently improve investor confidence.
For more information, kindly see our topical on Unit Trust Fund Performance Q1’2022
