As per the Capital Markets Authority (CMA) Quarterly Statistical Bulletin-Q4’2022, Unit Trusts’ Assets under Management (AUM) grew by 7.0% to Kshs 155.9 bn as at the end of Q3’2022, from Kshs 145.8 bn recorded in Q2’2022 and a year on year growth of 23.7% from Kshs 126.0 bn as at the end of Q3’2021. Key to note, Assets under Management of the Unit Trust Funds have registered an upward trajectory over the last five years, growing at a 5-year CAGR of 22.7% to Kshs 155.9 bn in Q3’2022, from Kshs 56.0 bn recorded in Q3’2017. The chart below shows the growth in Unit Trust Funds’ AUM. The key takes outs from the performance of the Unit Trust Funds include;
- Assets Under Management:
- Approved Collective Investment Schemes:
According to the Capital Markets Authority, as at the end of Q3’2022, there were 32 Collective Investment Schemes (CISs) in Kenya, remaining unchanged from 32 recorded at the end of Q2’2022, but an 18.5% y/y increase from 27 recorded at the end of Q3’2021. Out of the 32, 20, equivalent to 62.5% were active while 12 (37.5%) were inactive. The table below outlines the performance of the Collective Investment Schemes comparing Q3’2022 and Q2’2022:
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Cytonn Report: Assets Under Management (AUM) for the Approved Collective Investment Schemes |
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|
No. |
Collective Investment Schemes |
Q2’2022 AUM |
Q2’2022 |
Q3'2022 AUM |
Q3’2022 |
AUM Growth |
|
(Kshs mns) |
Market Share |
(Kshs mns) |
Market Share |
Q2'2022 –Q3'2022 |
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|
1 |
CIC Unit Trust Scheme |
57,126.4 |
39.2% |
60,579.0 |
38.9% |
6.0% |
|
2 |
NCBA Unit Trust Scheme |
20,152.1 |
13.8% |
23,687.8 |
15.2% |
17.5% |
|
3 |
ICEA Unit Trust Scheme |
14,317.7 |
9.8% |
14,939.0 |
9.6% |
4.3% |
|
4 |
Sanlam Unit Trust Scheme |
12,676.3 |
8.7% |
14,542.6 |
9.3% |
14.7% |
|
5 |
British American Unit Trust Scheme |
13,868.3 |
9.5% |
13,439.1 |
8.6% |
(3.1%) |
|
6 |
Old Mutual Unit Trust Scheme |
6,883.6 |
4.7% |
7,363.3 |
4.7% |
7.0% |
|
7 |
Dry Associates Unit Trust |
3,611.9 |
2.5% |
3,849.3 |
2.5% |
6.6% |
|
8 |
Coop Unit Trust Scheme |
3,725.4 |
2.6% |
3,341.6 |
2.1% |
(10.3%) |
|
9 |
Nabo Capital Ltd |
3,016.0 |
2.1% |
3,158.7 |
2.0% |
4.7% |
|
10 |
Madison Asset Unit Trust Funds |
2,734.3 |
1.9% |
2,806.8 |
1.8% |
2.7% |
|
11 |
Zimele Unit Trust Scheme |
2,297.4 |
1.6% |
2,485.3 |
1.6% |
8.2% |
|
12 |
ABSA Unit Trust Scheme |
1,048.1 |
0.7% |
1,536.3 |
1.0% |
46.6% |
|
13 |
African Alliance Kenya Unit Trust Scheme |
1,743.4 |
1.2% |
1,476.6 |
0.9% |
(15.3%) |
|
14 |
Apollo Unit Trust Scheme |
730.5 |
0.5% |
809.5 |
0.5% |
10.8% |
|
15 |
Cytonn Unti Trust Fund |
771.4 |
0.5% |
795.7 |
0.5% |
3.1% |
|
16 |
Genghis Unit Trust Funds |
575.1 |
0.4% |
626.4 |
0.4% |
8.9% |
|
17 |
Orient Collective Investment Scheme |
262.0 |
0.2% |
247.9 |
0.2% |
(5.4%) |
|
18 |
Equity Investment Bank |
199.5 |
0.1% |
189.3 |
0.1% |
(5.1%) |
|
19 |
Amana Unit Trust Funds |
27.3 |
0.0% |
27.8 |
0.0% |
1.9% |
|
20 |
Wanafunzi |
0.7 |
0.0% |
0.7 |
0.0% |
1.0% |
|
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 |
- |
- |
- |
- |
- |
|
31 |
Amaka Unit Trust (Umbrella) Scheme |
- |
- |
- |
- |
- |
|
32 |
Mali Money Market Fund |
- |
- |
- |
- |
- |
|
Total |
145,767.5 |
100.0% |
155,902.6 |
100.0% |
7.0% |
|
Source: Capital Markets Authority: Quarterly Statistical Bulletin, Q4’2022, and CMA October 2022 List of Licencees
- Comparison with other markets and asset classes:
Unit Trust Funds’ assets recorded a q/q growth of 7.0% in Q3’2022, while the listed bank deposits recorded a growth of 1.6% over the same period.
Source: Central Bank of Kenya, Cytonn Research
- Performance of Money Market Funds
Money Market Funds (MMFs) in the recent past have gained popularity in Kenya driven by the higher returns they offer compared to the returns on bank deposits and treasury bills. According to the Central Bank of Kenya data, the average deposit rate increased by 20.0 bps to 6.8% in Q3’2022 from 6.6% recorded in Q2’2022. During the period under review, the 91-Day T-bill and the average deposit rate continued to offer lower yields, with the average yields for the month of September 2022 coming in at 8.9% and 6.8%, respectively, compared to September’s average MMF yield of 9.2%.
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Cytonn Report: Top 5 Money Market Fund Yield in Q3'2022 |
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Rank |
Money Market Fund |
Effective Annual Rate (Average Q3'2022) |
|
1 |
Cytonn Money Market Fund |
10.6% |
|
2 |
Zimele Money Market Fund |
9.9% |
|
3 |
Sanlam Money Market Fund |
9.5% |
|
4 |
Nabo Africa Money Market Fund |
9.5% |
|
5 |
Dry Associates Money Market Fund |
9.3% |
|
|
Average of Top 5 Money Market Funds |
9.7% |
|
|
Industry average |
9.1% |
Source: Daily Nation, Cytonn Research
- Comparison against other markets
The UTF industry at Kshs 155.9 bn, is still overshadowed by asset gatherers such as bank deposits at Kshs 4.4 tn and the pension industry at Kshs 1.5 tn as of Q3’2022. Below is a graph showing the sizes of different saving channels and capital market products in Kenya as at September 2022;
Source: CMA, RBA, CBK, SASRA Annual Reports and REITs Financial Statements
- Recommendations
In order to improve our Capital Markets and stimulate UTFs growth, we recommend the following actions:
- Encourage innovation and diversification of UTFs’ investments: At the end of Q3’2022, investment in the fixed income segment constituted 78.1% of all total investments by the collective investments schemes depicting concentration risk, while the remaining investment allocation of 21.9% is distributed to five asset classes. Therefore, there is need to encourage fund managers to invest in different sectors of the economy as this will spur diversification of investments as well as enhance innovation of other investment vehicles,
- Lower the minimum investment 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. According to the Kenya National Bureau of Statistics, 87.7% of employees earn below Kshs 100,000.0 monthly. As such, the high minimum initial and top up investments amounts deter potential investors,
- Update regulations: The current Collective Investments Schemes Regulations in Kenya were formulated in 2001 and have not been updated since, despite the dynamic nature of the capital markets worldwide. This has led to the regulations lagging behind by not including provisions for private offers that have grown in importance over the years, as well as lack of clear special funds guidelines to cater for the sophisticated investors’ interest in regulated alternative investments products. However, while there are efforts to update the regulations, we note that they remain in progress and are yet to be completed,
- Allow for sector funds: Under the current capital markets regulations, UTFs are required to diversify. However, 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 Unit Trust 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 capital markets governance and allow non-financial institutions to also serve as Trustees: The capital markets regulations should foster a governance structure that is more responsive to both market participants and market growth. In particular, restricting Trustees of Unit Trust Schemes to Banks only limits options, especially given the direct competition between the banking industry and capital markets,
- Provide Support to Fund Managers: In our opinion, the regulator, CMA needs to include market stabilization tools as part of the regulations/Act that will help Fund Managers meet fund obligations especially during times of distress like when there are a lot of withdrawals from the funds. This can be done by collaborating with industry players to find solutions rather than publicly shunning and alienating industry players facing challenges as this may not be in the best interest of investors,
- Encourage different players to enter the market to increase competition: Increased competition in capital markets will not only push Unit Trust Fund managers to provide higher returns for investors but it will also eliminate conflicts of interest in markets and enhance the provision of innovative products and services, and,
- Improve fund transparency to provide more information to investors: To increase transparency for investors, each Unit Trust Fund should be required to publish their portfolio holdings on a quarterly basis and make the information available to the public. Providing more information to investors will increase accountability by enabling them to make more informed decisions, which will boost investor confidence.
For more information, kindly see our topical on Unit Trust Fund Performance Q3’2022
