Trading at the Nairobi Stock Exchange. Many Kenyan investors buy shares, bonds, land and other assets directly, losing out on professional guidance. File
The Capital Markets Authority (CMA) has given Jubilee Holdings the green light to operate as a fund manager.
On Thursday, CMA gave Jubilee Financial Services, the investment subsidiary of the firm, the licence meaning that it can now invest on behalf of the public.
Experts said that although Jubilee’s entry signalled increased competition, there was still room for growth since many Kenyan investors were buying shares, bonds, land and other assets directly, losing out on professional guidance.
African Alliance Investment Bank chief executive Paul Mwai said market penetration for funds held under unit trusts was still low, offering newcomers an opportunity for growth.
Lack of product awareness and failure to understand how the firms work have resulted in low market penetration, said Mr Mwai. The value of assets under management by unit trust firms increased by 68 per cent last year, boosted by share price gains at the stock market and increased purchase of Treasury bonds.
Unit trust managers’ total assets rose by Sh16 billion to Sh28 billion in 2010, from Sh16.8 billion in 2009.
Mr Jim Dry, the managing director of fund management firm Dry Associates said the industry was not very attractive. “The unit trust field is getting a bit crowded,” he said. The entry of Jubilee is set to spark a scramble for clients at a time when Kenya’s financial services firms led by insurance companies are increasingly seeking a foothold in the asset management segment.
For Jubilee, it offers them an opportunity to manage assets of other insurance firms further diversifying its operations.
Banking deposits currently stand at Sh1 trillion which means that for every one shilling put into a unit trust Sh40 is put into a bank account, a similar gap applies to the Nairobi Stock Exchange which has a Sh1.1 trillion market capitalisation.
Drop in the ocean
The amounts held under unit trusts has been growing with data from CMA showing that by the end of last year the trusts were worth Sh28 billion, a 75 per cent increase from 2009’s Sh16 billion. The figures are, however, a drop in the ocean when compared to money held in stocks.
Jubilee’s entry in the market brings the number of licensed fund managers to 20.
