The number of Kenyans invested in collective investment schemes (CISs) or unit trusts, crossed the two million mark at the end of March in the backdrop of heightened interest in the pooled funds.
New data from the Capital Markets Authority (CMA) shows the number of CIS investors rose by 42.7 percent in the opening three months of the year to top 2,021,084 investors at the end of March, from 1,409,343 at the end of last year, an increase of over 600,000 investors.
The assets under management (AUM) of the unit trusts meanwhile rose by 28 percent to reach Sh496.2 billion in the same period from Sh389.2 billion previously.
The CMA has credited the growth in assets to the increased number of players in the space, along with increased marketing by fund managers.
“The increase can be attributed to the overall growth reported by existing CIS funds as well as additional funds registered by existing umbrella schemes and commenced reporting in Q1 2025,” the markets regulator said in a report.
“The increase can also be attributed to intensified marketing efforts by the fund managers.”
A unit trust represents an arrangement where investor funds are pooled together and used to invest in a portfolio of securities and other financial assets with the beneficial interest in the assets of the trust being divided into units.
The unit trusts rose in popularity among individual investors last year as the annualised return from the pooled funds, reached double digit as yields on the underlying assets which include Treasury bills, bonds and commercial bank fixed deposits soared.
The chief executive officer to the Fund Managers Association (FMA) Fred Mburu says the quarterly jump in the number of investors is likely a result of retail investors catching up on the asset class in the backdrop of the enhanced returns.
“I think what you are looking at is an accumulation of investor awareness. People also unfortunately tend to follow past performances. There is a bit of catchup by investors having seen the historical returns at over double digit,” he said.
The number of investors in CISs/unit trusts has now opened a sizeable gap to the number of retail investors in the Nairobi Securities Exchange (NSE), which grew by only 831 in the opening three months to touch 1,246,660.
Retail interest in the unit trusts has surpassed that of local equities despite the asset class only existing for a little over two decades compared to the local bourse which has existed for over 60-years.
Money market funds (MMFs) which are a type of unit trust investing primarily in short maturing instruments, such as Treasury bills and commercial bank fixed deposits, have remained the most popular schemes covering about 64.4 percent of the CISs or an asset base of Sh319.7 billion.
Special funds which primarily invest in offshore instruments are the second most popular funds with an asset base of Sh86.6 billion or a market share of 17.5 percent ahead of fixed income funds.
Returns from the popular MMFs have softened gradually since the third quarter of last year when domestic interest rates began to tumble.
Currently, annualised returns from the funds range between eight percent and 13 percent from previous highs of up to 17 percent.
Fund managers are nevertheless confident of retaining their attractiveness to retail investors based on the low-entry requirements placed on individuals.
“Despite the drop-in the rates of returns the unit trust funds remain attractive since they provide an accommodative entry level that may not be able to get a fair return elsewhere,” said Etica Capital Co-founder Kenneth Maina.
“For example, MMFs provide the opportunity for an investor with Sh100 to invest and earn a decent rate of returns that also outperforms inflation rates hence protecting the purchasing power.”
Fund managers net up to two percent of their asset under management (AUM) as fees from clients implying earnings of up to Sh9.9 billion in 12 months to March 2025.
The fund managers have leveraged technology in customer onboarding helping drive the growth of the CISs.
The FMA sees potential for further growth in both the number of investors and assets as the industry looks to further challenge traditional asset classes such as bank deposits.
“We have not even scratched the surface. The potential for CISs is enormous if you were to look at the size of customer deposits in banks. We are still a far-cry in terms of both the potential number of investors and AUM,” added Fred Mburu.
