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Unit trusts defy falling interest rates to hit Sh389bn in assets
CMA has approved 54 collective investment schemes as of December 31, 2024, with the investment vehicles offering 232 funds out of which 37 are tagged as active.
Collective investment schemes or unit trusts have defied falling interest rates to increase their assets under management (AUM) to Sh389.2 billion in the three-month period to December 2024 from Sh316.4 billion in September.
The 23 percent jump in AUM for the funds has been achieved against a backdrop of declining rates on government securities and fixed deposit accounts, where the bulk of cash from the schemes is packed.
The Capital Markets Authority (CMA) has attributed the continued growth of the unit trusts to the entry of new funds and a heightened interest in money market funds --a type of unit trust fund popular with retail investors.
“This growth can be attributed to the additional funds registered and the heightened interest in money market funds among investors. The increase is also a result of intensified marketing efforts by fund managers,” CMA said in a new report on collective investment schemes.
CMA has approved 54 collective investment schemes as of December 31, 2024, with the investment vehicles offering 232 funds out of which 37 are tagged as active.
The AUM growth in the three months was the second fastest in a single quarter since the regulator began compiling data on the schemes in March 2018.
The allure of unit trusts to retail investors has been pegged on relatively high returns in the past, round-the-clock customer support from fund managers and a low entry level of as little as Sh100.
The fall in interest rates since the second half of last year is yet to deter retail investor participation and new fund managers from entering the space.
Annualised interest rates on select unit trust schemes fell by between one and two percentage points between October and December, lowering the potential yield earned by investors.
Returns on the CIC Kenya shilling denominated unit trust, for instance, dropped from 13.7 percent to 12.67 percent in three months, while Kuza’s fell from 16.92 percent to 15.7 percent.
Unit trusts returns have continued to fall as the Central Bank of Kenya cuts its benchmark rate further, shaving yields on government securities and fixed deposit accounts.
This has not deterred investors, with the number of unit trust investors nearing 1.5 million, up from 1.2 million.
“The number of investors in the various CIS [collective investment schemes] funds has continued to grow steadily over time. As of December 31, 2024, there were a total of 1,409,343 investors, representing a seven percent increase from 1,299,300 investors in June 2024,” CMA added.
The CIC Unit Trust Scheme remains the largest collective investment scheme with an AUM of Sh82.4 billion from Sh70.3 billion at the end of September 2024, representing a 21 percent market share of the unit trusts.
The Stanbic Unit Trust Scheme recorded the fastest growth of 621 percent in the quarter to December to reach an AUM of Sh2.4 billion from Sh338.1 million.
Money market funds, which largely invest in Treasury bills and commercial bank fixed deposits, remain the most popular type of CIS having held a 63 percent proportion of unit trusts or Sh246.8 billion.
