Date: April 10, 2020
To: Cytonn Stakeholders and Clients
From: Edwin H. Dande, Chief Executive Officer, Cytonn Investments Management Plc
RE: CLARIFICATION ON VARIOUS PORTFOLIOS WE MANAGE AS CYTONN INVESTMENTS
I trust this note finds you holding up well, even in these difficult and unprecedented times.
The purpose of this note is to provide clarification to our clients and stakeholders on the various portfolios we manage in light of the various misleading comments on social media.
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Product / Issue |
Status |
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1 |
Cytonn Money Market Fund, CMMF, & other Regulated Unit Trust Funds (governed by the Capital Markets Authority, CMA) |
· Our unit trust funds, with the Cytonn Money Market Fund as the flagship fund, remain operating as usual without any changes, · Approximately 80% of the Cytonn Money market Fund is invested in Cash, Deposits and Government Instruments, hence the fund is extremely liquid, hence the lower return of 11% p.a compared to our other funds, · The digitization of CMMF as a wallet that pays 11% p.a., immediately available 24/7 over the phone, and can also be used to pay bills, has proven useful to our clients and continued to grow even during the COVID-19 outbreak, · Also, for the benefit of our clients, we have increased the amounts one can withdraw automatically to their M-PESA from Kshs. 70,000 to Kshs. 150,000 in one transaction, and to Kshs. 300,000 per day. Simply dial *809# to access the service, · 13,000 of our investors in this fund continue to withdraw and invest instantly through *809#, so the social media comments that the fund has been suspended are misleading. · Invest or withdraw instantly, 24 /7 by just dialing *809# |
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2 |
Cytonn High Yield Fund, CHYF (regulated specialized fund governed by the Capital Markets Authority, CMA) |
· The fund is operating normally, and is subject to the fund’s policy of no withdrawal over the first 90-days; the first 90-days of no withdrawal is a feature of the fund that has been there since the formation of CHYF and captured in the Trust Deed and Rules, and also approved by the Capital Markets Authority, CMA · There have been no changes at all with the fund contrary to some social media comments · While the fund invests in real estate to deliver a higher yield than the money market fund, it keeps ample liquidity hence the rate of return of 14.1% p.a. as of 9th April 2020 |
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3 |
Cytonn High Yield Solutions, (CHYS) and Cytonn Project Notes, (CPN) (unregulated real estate funds governed by a Board of Investors) |
· These funds remain operating normally · However, given that they invest predominantly in real estate, reflecting in the high yield returns of 18% p.a., they have been impacted by COVID-19, just like the rest of the real estate funds in the world, · Because the fund is invested in real estate developments, and during this COVID-19 period with construction activity reduced, lands office closed, purchasers of real estate units paying slower and reduced inflows like with any other fund or business activity during this period, it would be strange for the fund not to feel the impact of the prevailing challenging environment, · Consequently, investors of the fund through their Board of Investors, in consultation with the Principal Partner, passed a resolution extending all maturities by 90-days; 90 days is a period within which we expect the sites to reopen, · A resolution by investors is binding to all investors. This Extension of Maturities resolution is in line with Clause 21 of the investment agreement, which exists precisely for these kinds of scenarios and times; and the resolution was communicated to all investors through the weekly client update sent to all clients on 31st March · The real estate funds have 3,000 investors, the majority of whom understand that a fund invested in real estate cannot have the same liquidity and flexibility compared to the Cytonn Money Market Fund, · Kindly note that a restructuring of real estate funds in this COVID-19 environment is not unique to Cytonn, and please see Appendix 1 for the actions taken by real estate funds across the globe, which amounts to funds managing over Kshs 2.7 trillion worth of investments in real estate. |
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4 |
Pension Funds (regulated by the Retirement Benefits Authority, RBA) |
· Pensions are long-term funds and those will also continue to operate normally; investments can be made at any time and withdrawals also done at any time, according to the relevant portfolio regulations by the Retirement Benefits Authority, RBA. |
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5 |
Real Estate Projects |
· Given the ongoing COVID-19 environment, we have either closed or drastically reduced labour in all our sites for the next 90-days. It would be irresponsible not to take these actions, and even if we didn’t want to close, most of our contractors and sub-contractors are not available to work during this COVID-19 period. |
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6 |
Other Comments |
· We have noted comments on social media that Cytonn Investments does not have assets underlying its business. This is misleading, as the group has vast real estate assets, specifically 1. Owner of CySuites Serviced Apartment in Westlands 2. Development of Amara Ridge in Karen 3. Development of Applewood in Miotoni Karen 4. Development of The Alma in Ruaka 5. Development of The Ridge in Ridgeways 6. Second Largest Shareholder in Superior Homes, 12.5%, the developer of Greenpark on Mombasa Road 7. Development of RiverRun, 100-acres in Ruiru 8. Land banking of 30-acres in Ololua Ridge for our Situ Village Development 9. Land banking of 4-acres in Kilimani for a mixed-use development 10. Land banking of 0.5-acres in Westlands next close to Capital Club for future development 11. Development of Taraji Heights in Ndenderu 12. JV partner of 1,000 acres in Athi River We reassure our investors that the group has one of the best portfolios of real estate investments, hence the commentary that the group has no assets is misleading and malicious. |
We trust that the above helps to clarify any questions or concerns that you may have as Stakeholders and / or Clients. Once again, we view strong corporate governance, which includes responding timely and openly to any inquiries made, as a decisive competitive advantage for the Cytonn Group, and we hope you shall continue to let us know whenever you may have questions.
Please do not hesitate to contact 0709 101 200 in case of any enquiries, or email us at clientmatters@cytonn.com.
Yours Faithfully,
For: Cytonn Investments Management Plc
Edwin H. Dande
Chief Executive Officer
APPENDIX: SUMMARY OF REAL ESTATE FUNDS ACTIONS DUE TO COVID
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No. |
Name of Fund / Company |
Location |
Size |
Action Taken & Statements |
Link |
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1 |
M&G Property Portfolio for M&G Investments |
United Kingdom |
GBP 2.4 billion Kshs 307 billion |
Due to the spread and impact of COVID-19 on the commercial property market in the UK, there has been a temporary suspension in the dealing of shares in the fund. |
M&G Property Portfolio — Important information on the suspension of dealings |
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2 |
Great-West Life Canadian Real Estate Investment Fund No. 1 for Canada Life Assurance Company |
Canada |
USD 6 billion Kshs 624 billion |
Suspension of the funds due to the impact of COVID-19 on the global property market, which has affected Canada Life’s ability to ensure unitholders are buying and selling units at a price that reflects their value. "Given the current economic environment, redemption requests have recently increased. Real estate assets are generally less liquid than other major asset classes and cannot be rapidly liquidated" |
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3 |
Legal & General Property Fund |
United Kingdom |
GBP 2.9 billion Kshs 371 billion |
In a statement on its website, L&G said it has suspended the fund in light of ‘extreme market volatility’ and ‘exceptional circumstances’ in the UK property market. This is as a result of the coronavirus pandemic. |
L&G suspends £2.9bn property fund in latest coronavirus casualty |
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4 |
Janus Henderson UK Property Fund |
United Kingdom |
GBP 1.95 bn Kshs 249 bn |
Temporarily suspended dealings in their UK real estate funds as market turbulence caused by coronavirus made it hard to accurately value the properties they contain. |
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5 |
Kames Property Income Fund |
United Kingdom |
GBP 721 mn Kshs 92 bn |
Temporarily suspended dealings in their UK real estate funds as market turbulence caused by coronavirus made it hard to accurately value the properties they contain. “The ongoing coronavirus crisis...is a real concern for all of us,” Stephen Jones, chief executive of Kames Capital, said in a letter to investors. |
Kames, Janus Henderson suspend UK property funds on coronavirus turbulence |
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6 |
Aberdeen UK Property Fund Standard Life Investments UK Real Estate ASI Global Real Estate Fund All funds for Standard Life Aberdeen |
United Kingdom |
Total of GBP 3.3 billion Kshs 422 billion |
“Markets around the world have experienced huge disruption as COVID-19 spreads and trading in the UK property market is being severely impacted. As a result, the funds’ Standing Independent Valuers have informed us it is not currently possible to provide accurate and reliable valuations for certain assets, including the properties held in the Funds.” |
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7 |
Columbia Threadneedle - Threadneedle UK Property Authorised Investment Fund (PAIF) |
United Kingdom |
GBP 1.4 billion Kshs 179 billion |
The Threadneedle PAIF’s independent property valuer, CBRE, has deployed a ‘market uncertainty clause’ which means it is unable to provide an accurate valuation of the PAIF’s assets in the current exceptional market environment. |
COLUMBIA THREADNEEDLE SUSPENDS DEALING IN RETAIL PROPERTY FUND |
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8 |
St James’s Place Property Unit Trust St James’s Place Property Life Fund St James’s Place Property Pension Fund |
United Kingdom |
GBP 3.6 billion Kshs 460 billion |
“Property fund valuers across the market are currently unable to accurately or fairly value the properties within our property funds. “Therefore, we have suspended dealing on our range of three UK commercial property funds – the SJP Property Unit Trust, Property Life fund and Property Pension fund.” |
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Total |
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Kshs 2.7 trillion |
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