As per the Capital Markets Authority (CMA) Quarterly Statistical Bulletin-Q1’2023, the industry’s overall Assets under Management (AUM) grew by 3.3% on a quarter-on-quarter basis to Kshs 161.0 bn at the end of FY’2022, from Kshs 155.9 bn recorded in Q3’2022. Similarly, on a y/y basis, the total AUM increased by 19.6% to Kshs 161.0 bn from Kshs 134.8 bn as of the end of FY 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 23.0% to Kshs 161.0 bn in FY’2022, from Kshs 57.2 bn recorded in FY’2017. 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 at the end of FY’2022, there were 34 Collective Investment Schemes (CISs) in Kenya, up from 32 recorded at the end of Q3’2022, and a further 20.7% y/y increase from 29 recorded at the end of FY’2021. Out of the 34, 21, equivalent to 61.8%, were active, while 13 (38.2%) were inactive. The table below outlines the performance of the Collective Investment Schemes comparing Q3’2022 and FY’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 |
Q3'2022 AUM |
Q3’2022 |
FY'2022 AUM |
FY’2022 |
AUM Growth |
|
(Kshs mns) |
Market Share |
(Kshs mns) |
Market Share |
Q3'2022 –FY'2022 |
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|
1 |
CIC Unit Trust Scheme |
60,579.0 |
38.9% |
61,263.9 |
38.1% |
1.1% |
|
2 |
NCBA Unit Trust Scheme |
23,687.8 |
15.2% |
25,342.0 |
15.7% |
7.0% |
|
3 |
Sanlam Unit Trust Scheme |
14,542.6 |
9.3% |
15,841.6 |
9.8% |
8.9% |
|
4 |
ICEA Unit Trust Scheme |
14,939.0 |
9.6% |
14,758.9 |
9.2% |
(1.2%) |
|
5 |
British American Unit Trust Scheme |
13,439.1 |
8.6% |
13,318.0 |
8.3% |
(0.9%) |
|
6 |
Old Mutual Unit Trust Scheme |
7,363.3 |
4.7% |
7,570.5 |
4.7% |
2.8% |
|
7 |
Dry Associates Unit Trust |
3,849.3 |
2.5% |
3,881.8 |
2.4% |
0.8% |
|
8 |
Coop Unit Trust Scheme |
3,341.6 |
2.1% |
3,567.4 |
2.2% |
6.8% |
|
9 |
Nabo Capital Ltd |
3,158.7 |
2.0% |
3,291.4 |
2.0% |
4.2% |
|
10 |
Madison Asset Unit Trust Funds |
2,806.8 |
1.8% |
2,923.2 |
1.8% |
4.1% |
|
11 |
Zimele Unit Trust Scheme |
2,485.3 |
1.6% |
2,605.5 |
1.6% |
4.8% |
|
12 |
ABSA Unit Trust Scheme |
1,536.3 |
1.0% |
2,342.1 |
1.5% |
52.5% |
|
13 |
African Alliance Kenya Unit Trust Scheme |
1,476.6 |
0.9% |
1,579.3 |
1.0% |
7.0% |
|
14 |
Apollo Unit Trust Scheme |
809.5 |
0.5% |
871.1 |
0.5% |
7.6% |
|
15 |
Cytonn Unit Trust Fund |
795.7 |
0.5% |
774.5 |
0.5% |
(2.7%) |
|
16 |
Genghis Unit Trust Funds |
626.4 |
0.4% |
608.9 |
0.4% |
(2.8%) |
|
17 |
Orient Collective Investment Scheme |
247.9 |
0.2% |
248.0 |
0.2% |
0.0% |
|
18 |
Equity Investment Bank |
189.3 |
0.1% |
185.5 |
0.1% |
(2.0%) |
|
19 |
Amana Unit Trust Funds |
27.8 |
0.0% |
27.8 |
0.0% |
0.3% |
|
20 |
GenAfrica Unit Trust Scheme |
0 |
0.0% |
2.9 |
0.0% |
0.0% |
|
21 |
Wanafunzi |
0.7 |
0.0% |
0.7 |
0.0% |
2.6% |
|
22 |
Genghis Specialized Funds |
- |
- |
- |
- |
- |
|
23 |
Standard Investments Bank |
- |
- |
- |
- |
- |
|
24 |
Diaspora Unit Trust Scheme |
- |
- |
- |
- |
- |
|
25 |
Dyer and Blair Unit Trust Scheme |
- |
- |
- |
- |
- |
|
26 |
Jaza Unit Trust Fund |
- |
- |
- |
- |
- |
|
27 |
Masaru Unit Trust Fund |
- |
- |
- |
- |
- |
|
28 |
Adam Unit Trust Fund |
- |
- |
- |
- |
- |
|
29 |
First Ethical Opportunities Fund |
- |
- |
- |
- |
- |
|
30 |
Natbank Unit Trust Scheme |
- |
- |
- |
- |
- |
|
31 |
Amaka Unit Trust (Umbrella) Scheme |
- |
- |
- |
- |
- |
|
32 |
Mali Money Market Fund |
- |
- |
- |
- |
- |
|
33 |
Jubilee Unit Trust Scheme |
- |
- |
- |
- |
- |
|
34 |
Enwealth Capital Unit Trust |
- |
- |
- |
- |
- |
|
Total |
155,902.6 |
100.0% |
161,004.8 |
100.0% |
3.3% |
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Source: Capital Markets Authority: Quarterly Statistical Bulletin, Q1’2023, and Collective Investments Scheme December 2022
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 61.3 bn in FY’2022, from an AUM of Kshs 60.6 bn in Q3’2022, translating to a 1.1% AUM growth, albeit a lower growth rate from 6.0% AUM growth recorded in Q3’2022,
- Growth: In terms of AUM growth, Absa Unit Trust recorded the highest growth for the fourth consecutive quarter, with its AUM increasing to Kshs 2.3 bn, from Kshs 1.5 bn in Q3’2022, equivalent to a 52.5% AUM growth. On the other hand, Genghis Unit Trust Fund recorded the largest decline, with its AUM declining by 2.8% to Kshs 0.61 bn in FY’2022, from Kshs 0.63 bn in Q3’2022,
- Market Share: CIC Unit Trust Scheme remained the largest overall Unit Trust with a market share of 38.1%, a 0.8% points decline from 38.9% achieved in Q3’2022. The decline in market share is an indication of increasing competition as new collective schemes enter the market,
- New Collective Investment Schemes: GenAfrica Unit Trust Scheme, with an AUM of Kshs 2.9 mn, became an active collective investment scheme in the capital market at the end of FY’2022, increasing the number of active collective schemes to 21. Additionally, Kuza money market fund began its operation in December, posting its first daily yield on 23rd December 2022,
Money Market Funds had the highest average effective annual yield declared, with the Cytonn Money Market Fund having the highest effective annual yield at 10.6% against the industry average of 9.1%.
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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) |
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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% |
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|
Average of Top 5 Money Market Funds |
9.7% |
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|
Industry average |
9.1% |
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 23.0% to Kshs 161.0 bn in FY’2022, from Kshs 57.2 bn recorded in FY’2017. However, the industry is still overshadowed by other asset gatherers such as bank deposits, with the entire banking sector deposit coming in at Kshs 4.7 tn and the pension industry at Kshs 1.8 tn as of December 2022. Below is a graph showing the sizes of different saving channels and capital market products in Kenya as at December 2022;
* Data as of December 2021
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:
we recommend the following actions to stimulate the growth of UTFs in the Kenyan capital market;
- 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 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 diversification of investments, as seen in the US UTF industry, as well as enhance innovation of other investment vehicles and,
- 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 to 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,
- 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, and,
- 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. 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, FY’2022
