As per the Capital Markets Authority (CMA) Quarterly Statistical Bulletin-Q2’2023, the industry’s overall Assets under Management (AUM) grew by 2.0% on a quarter-on-quarter basis to Kshs 164.3 bn at the end of Q1’2023, from Kshs 161.0 bn recorded in FY’2022. On a y/y basis, the total AUM increased by 16.8% to Kshs 164.3 bn from Kshs 140.7 bn as of the end of Q1’2022. 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 25.3% from Kshs 53.1 bn recorded in Q1’2018. The key takes outs from the performance of the Unit Trust Funds include;
- Assets Under Management:
Source: Capital Markets Authority Quarterly Statistical bulletins
- Approved Collective Investment Schemes:
According to the Capital Markets Authority, as of the end of Q1’2023, there were 36 Collective Investment Schemes (CISs) in Kenya, up from 34 recorded at the end of FY’2022 and 30 recorded at the end of Q1’2022. Out of the 36, 25 schemes, equivalent to 69.4%, were active, while 11 (30.6%) were inactive. The table below outlines the performance of the Collective Investment Schemes comparing FY’2022 and Q1’2023.
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Cytonn Report: Assets Under Management (AUM) for the Approved Collective Investment Schemes |
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No. |
Collective Investment Schemes |
FY'2022 AUM |
FY’2022 |
Q1'2023 AUM |
Q1’2023 |
AUM Growth |
|
(Kshs mn) |
Market Share |
(Kshs mn) |
Market Share |
FY'2022 –Q1'2023 |
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1 |
CIC Unit Trust Scheme |
61,263.9 |
38.1% |
56,970.2 |
34.7% |
(7.0%) |
|
2 |
NCBA Unit Trust Scheme |
25,342.0 |
15.7% |
27,739.7 |
16.9% |
9.5% |
|
3 |
Sanlam Unit Trust Scheme |
15,841.6 |
9.8% |
16,915.2 |
10.3% |
6.8% |
|
4 |
ICEA Unit Trust Scheme |
14,758.9 |
9.2% |
14,558.6 |
8.9% |
(1.4%) |
|
5 |
British American Unit Trust Scheme |
13,318.0 |
8.3% |
13,201.8 |
8.0% |
(0.9%) |
|
6 |
Old Mutual Unit Trust Scheme |
7,570.5 |
4.7% |
8,035.6 |
4.9% |
6.1% |
|
7 |
Dry Associates Unit Trust |
3,881.8 |
2.4% |
4,497.9 |
2.7% |
15.9% |
|
8 |
Coop Unit Trust Scheme |
3,567.4 |
2.2% |
4,011.4 |
2.4% |
12.4% |
|
9 |
Nabo Capital Ltd |
3,291.4 |
2.0% |
3,943.2 |
2.4% |
19.8% |
|
10 |
Madison Asset Unit Trust Funds |
2,923.2 |
1.8% |
3,565.4 |
2.2% |
22.0% |
|
11 |
ABSA Unit Trust Scheme |
2,342.1 |
1.5% |
2,869.6 |
1.7% |
22.5% |
|
12 |
Zimele Unit Trust Scheme |
2,605.5 |
1.6% |
2,692.9 |
1.6% |
3.4% |
|
13 |
African Alliance Kenya Unit Trust Scheme |
1,579.3 |
1.0% |
1,595.8 |
1.0% |
1.0% |
|
14 |
Mali Money Market Fund |
- |
0.0% |
877.4 |
0.5% |
0.0% |
|
15 |
Apollo Unit Trust Scheme |
871.1 |
0.5% |
862.0 |
0.5% |
(1.0%) |
|
16 |
Cytonn Unit Trust Fund |
774.5 |
0.5% |
701.4 |
0.4% |
(9.4%) |
|
17 |
Genghis Unit Trust Funds |
608.9 |
0.4% |
620.0 |
0.4% |
1.8% |
|
18 |
Orient Collective Investment Scheme |
248.0 |
0.2% |
252.2 |
0.2% |
1.7% |
|
19 |
Equity Investment Bank |
185.5 |
0.1% |
185.7 |
0.1% |
0.1% |
|
20 |
Kuza Asset Managers |
- |
0.0% |
72.1 |
0.0% |
0.0% |
|
21 |
KCB Asset Managers |
- |
0.0% |
56.3 |
0.0% |
0.0% |
|
22 |
Amana Unit Trust Funds |
27.8 |
0.0% |
26.5 |
0.0% |
(5.0%) |
|
23 |
GenAfrica Unit Trust Scheme |
2.9 |
0.0% |
19.1 |
0.0% |
549.6% |
|
24 |
Etica Capital Limited |
- |
0.0% |
5.3 |
0.0% |
0.0% |
|
25 |
Wanafunzi Investments |
0.7 |
0.0% |
0.7 |
0.0% |
2.2% |
|
26 |
Genghis Specialized Funds |
- |
- |
- |
- |
- |
|
27 |
Standard Investment Trust Funds |
- |
- |
- |
- |
- |
|
28 |
Diaspora Unit Trust Scheme |
- |
- |
- |
- |
- |
|
29 |
Dyer and Blair Unit Trust Scheme |
- |
- |
- |
- |
- |
|
30 |
Jaza Unit Trust Fund |
- |
- |
- |
- |
- |
|
31 |
Masaru Unit Trust Fund |
- |
- |
- |
- |
- |
|
32 |
Adam Unit Trust Fund |
- |
- |
- |
- |
- |
|
33 |
First Ethical Opportunities Fund |
- |
- |
- |
- |
- |
|
34 |
Amaka Unit Trust (Umbrella) Scheme |
- |
- |
- |
- |
- |
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35 |
Jubilee Unit Trust Scheme |
|
|
|
|
|
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36 |
Enwealth Capital Unit Trust |
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|
|
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Total |
161,004.8 |
100.0% |
164,276.0 |
100.0% |
2.03% |
Source: Capital Markets Authority: Quarterly Statistical Bulletin, Q2’2023
Key takeouts from the above table include:
- Assets Under Management: CIC Unit Trust Scheme remained the largest overall Unit Trust Fund, with an AUM of Kshs 57.0 bn in Q1’2023, albeit lower than the AUM of Kshs 61.3 bn in FY’2022, translating to a 7.0% decline in AUM growth,
- Growth: In terms of AUM growth, GenAfrica Unit Trust Scheme recorded the highest growth of 549.6%, with its AUM increasing to Kshs 19.1 mn, from Kshs 2.9 mn in FY’2022, equivalent to a 549.6% AUM growth, due to the low base effect. On the other hand, Cytonn Unit Trust Fund recorded the largest decline, with its AUM declining by 9.4% to Kshs 701.4 mn in Q1’2023, from Kshs 774.5 mn in FY’2022,
- Market Share: CIC Unit Trust Scheme remained the largest overall Unit Trust with a market share of 34.7%, 3.4% points decline from 38.1% recorded in FY’2022. The decline in market share is an indication of increasing competition as new collective schemes enter the market,
- New Collective Investment Schemes: Mali Money Market Fund scheme, Kuza Unit trust scheme, KCB unit trust schemes, and Etica Unit trusts schemes, with AUMs of Kshs 877.4 mn, Kshs 72.1 mn, Kshs 56.3 and Kshs 5.3 mn respectively, became active collective investment schemes in the capital market during Q1’2023, increasing the number of active collective schemes to 25.
- 11 UTFs remained inactive during at the end of Q1’2023: 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, Genghis Specialized Fund, Jubilee Unit Trust, Enwealth Capital Trust and Amaka Unit Trust remained inactive as at the end of Q1’2023,
Money Market Funds had the highest average effective annual yield declared, with the Cytonn Money Market Fund having the highest effective annual yield at 10.9% against the industry Q1’2023 average of 9.4%.
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Cytonn Report: Top 5 Money Market Fund Yield in Q1’2023 |
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Rank |
Money Market Fund |
Effective Annual Rate (Average Q1'2023) |
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1 |
Cytonn Money Market Fund |
10.9% |
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2 |
Apollo Money Market Fund |
10.2% |
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3 |
GenCap Hela Imara Money Market Fund |
9.9% |
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4 |
NCBA Money Market Fund |
9.9% |
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5 |
Zimele Money Market Fund |
9.9% |
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Average of Top 5 Money Market Funds |
10.2% |
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Industry average |
9.4% |
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Source: Daily Nation, Cytonn Research
- Comparison against other asset classes
Over the past 5 years, Unit Trust Funds (UTFs) AUM has exhibited positive performance, with the Unit Trust Funds AUM having grown at a 5-year CAGR of 25.3% to Kshs 164.3 bn in Q1’2023, from Kshs 53.1 bn recorded in Q1’2018. However, the industry is still dwarfed when compared to other deposit-taking institutions such as bank deposits, with the entire banking sector deposit coming in at Kshs 4.8 tn as at March 2023 and the pension industry at Kshs 1.6 tn as of December 2022. Below is a graph showing the sizes of different saving channels and capital market products in Kenya;
* Data as of December 2021
Total Bank Deposit as of 31st March 2023
Pension Funds as of 31st December 2023
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:
- 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 are earning below Kshs 100,000.0 monthly. As such, the high minimum initial and top-up investment amounts for investing in sector-specific funds deter potential investors. Furthermore, these high amounts disadvantage the majority of retail investors by restricting their options for investments,
- Encourage innovation and diversification of UTFs’ investments: The majority of UTFs’ investments are either in fixed income or fixed deposits, highlighting high concentration risks. There is a need to encourage fund managers to invest in different sectors of the economy, as this will spur the diversification of investments such as real estate and private offers. As of 31st March 2023, the total allocation to Government securities and Fixed deposits stood at 46.2% and 39.5%, respectively, accounting for 85.7% of the total AUM for unit trust, thus bringing about concentration risk.
- 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. For instance, the regulations do not include provisions for private offers that have grown in importance over the years. The regulations also lack stipulated guidelines on special funds to cater for the sophisticated investors’ interest in regulated alternative investment products. 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. For example, in Kenya, Real Estate continues to play an important role in the economy, contributing 10.0% to the GDP as of March 2023 and remains a popular investment option due to the stable returns it delivers and low correlation with traditional investments. However, looking at the various types of Unit trusts we have, investments in real estate are conspicuously missing.
- Incentives: Introduce incentives such as tax benefits or government subsidies for unit trust fund investments to encourage more people to consider them as part of their investment portfolio, similar to pensions and Education plans. This will be of great importance in encouraging investors to invest in a long time horizon.
- Better disclosure by UTFs: For an investor to make an informed decision, they need to be provided with a detailed portfolio holding of the UTFs. Investors need to understand where their money is invested so as to be aware of the risk their investments are exposed to. The information should be available to the investors and also to prospective clients.
- 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. Notably, the pension industry has 6 non-bank Trustees, yet the capital market only has one non-bank Trustee. Opening up the corporate trustee will bring about a more competitive and predictable trustee environment and consequently bring about more innovation and better services by trustees and growth in 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. We commend and appreciate the regulator’s role in safeguarding investor interests. However, since Fund Managers also play a significant role in the capital markets, the regulator should also protect the reputation of different fund managers in the industry.
For more information, kindly see our topical on Unit Trust Fund Performance, Q1’2023
