New entrants in the budding collective investment schemes industry have leveraged technology and low entry thresholds to drive greater retail participation while taking the fight to legacy fund managers.
The newbies, who include Kuza Asset Management, Enwealth Capital and Etica Capital, have for instance grown assets under management (AUM) in the collective schemes to a total of Sh1.6 billion as of March 2024 in just over a year since setting up shop, according to data from the Capital Markets Authority (CMA).
The new breed of fund managers have multiplied their assets under management in an industry already controlled by legacy players including insurers CIC, Britam, Sanlam and asset manager ICEA.
In contrast, CIC, the largest collective investment scheme with a market share of 27.5 percent, saw a 2.2 percent drop in assets under management to Sh61.9 billion from Sh63.3 billion.
Britam and ICEA also marked a 5.3 percent and 1.9 percent contraction in assets respectively in the same quarter.
According to Kenneth Maina, the co-founder of Etica Capital, technology including a paperless onboarding process and round the clock customer support has played a central role in the growth.
“A client can onboard from anywhere without needing forms. They can come in, deposit and even upload their know your customer credentials online and also withdraw without ever speaking to anyone. We also offer customer service 24/7 even on weekends and holidays which the big boys often don’t,” he noted.
He added: "We have also targeted a mass market with an entry level of as low as Sh100. Those individuals were not served before and that’s why after 15 months we have over 36,000 clients.”
The CMA has so far approved 36 collective investment schemes made up of 150 funds.
Despite the seemingly saturation of the market, the assets under management of the funds have grown from Sh56.6 billion in March 2018 to Sh255.4 billion as of March 31, 2024.
At the same time, the industry has continued to draw in more players with CMA issuing a record number of licences in the past year.
Xeno Investment Management is one such licensee set to debut its unit trust scheme later this year which shall comprise of a money market fund, an equity fund and a fixed income fund with the minimum investment amount set at Sh500.
Xeno CEO and founder Aeko Ongodia said he sees the potential to still tap new participants despite the saturation of players by going for the mass market which he terms as underserved.
According to Mr Ongondia, new entrants can find success by focusing on financial inclusion and reaching the highest number of retail clients as opposed to legacy fund managers who might view unit trusts as just another revenue line for a larger business.
“There has been a publicising of returns and AUM but not as much emphasis on the number of participants. When you look into the number of participants, there are just about 200,000 unique accounts. This means there is still very low coverage given the size of the Kenyan population,” he said.
Collective investment schemes are pools of funds that are managed on behalf of investors by a professional fund manager.
In return for putting money into these funds, the investor receives units that represent their pro-rata share of the pool of funds assets.
The unit trusts may take the form of equity funds, bond/fixed income funds, balanced funds, money market funds and special funds.
