Some 1.2 million Kenyans have signed up with unit trusts or collective investment schemes, lured by bigger returns, pushing the total assets under management by the investment vehicles to Sh254 billion in the three months ended June.
A unit trust is typically a pool of funds run by a professional manager on behalf of investors.
A fund manager may choose to invest in bonds or shares on the stock market, and the fund is split into units, which investors purchase—granting them access to mortgages, securities and cash equivalents.
Maiden data by the Capital Markets Authority (CMA) on the number of investors enrolled in unit trusts scheme shows that some 1.2 million were signed up in the investment vehicles as of June 2024, up from 172,000 in March 2021, marking a 605 percent leap -- indicating the rising popularity of the asset class among Kenyans in recent years.
“The number of investors in the various collective investment funds (CISs) has continued to grow steadily over time, reporting a growth rate of 605 percent between March 2021 to grow from 172,000 to 1.2 million in June 2024,” said CMA.
The unit trusts' popularity is attributable to a variety of factors including enhanced returns for investors amid high interest rates from government securities and bank fixed deposits where the schemes primarily invest.
They have become popular among retail investors because of enhanced returns, low entry requirements, and ease of accessing funds.
Unit trusts have also leveraged technology to ease onboarding of individual investors including round-the-clock availability of customer support.
Some fund managers also make it easy for investors to exit schemes and make unlimited withdrawals without penalties—a contrast with other asset classes such as stocks and bonds, which expose investors to revaluation losses.
CMA data shows that securities issued by the government have remained the leading destination for portfolio investments by the trusts, representing Sh39.2 percent of assets under management or Sh107.6 billion ahead of fixed deposits and cash and demand deposits at 33.4 and 13.9 percent respectively.
Returns from both government securities and bank fixed deposits have soared in the first half of 2024 anchored largely on the increase in benchmark lending rates by the Central Bank of Kenya.
Money market funds, a sub-category of unit trusts that primarily invest in cash and near cash assets such as bank fixed deposits, have delivered the highest yields to investors with the latest data showing an annualised return of up to 18.26 percent.
Money market funds account for Sh171 billion or 67.4 percent of all the funds under the management by collective investment schemes in the quarter that ended June 2024, with fixed income funds in second place with an asset base of Sh52 billion or a 20.5 percent market share.
Etica Capital Limited's collective investment scheme marked the highest growth in the size of assets under management in the quarter at Sh149.2 billion to hit Sh2.56 billion from Sh1 billion in March.
CIC Unit Trust Scheme, meanwhile, remains the largest collective scheme with an asset base of Sh66.8 billion ahead of Sanlam and NCBA at Sh37.6 billion and Sh33.1 billion, respectively.
CMA has approved 51 schemes, which comprise 224 funds including equity funds, balanced funds, and special funds.
Unit trusts/fund managers earn income from fees, which are usually charged as a percentage of each investor’s assets under management, averaging between one and three percent, as per the managers' disclosures.
