Capital Markets

Cytonn to continue cash management but seeks separate CMA fund licence


Edwin Dande, the Cytonn Investments Management CEO. PHOTO | DIANA NGILA

Cytonn has said it will continue offering cash management services to private clients despite seeking the regulator’s nod to set up a separate fund management unit.

The real estate-focused private equity firm has applied to the Capital Markets Authority (CMA) for a fund manager licence to begin offering wealth management services to the investing public.

The proposed Cytonn Asset Managers (CAM) will not affect the holding company’s other unregulated activities such as venture capital, real estate and cash management, the PE firm said.

“We want to be able to offer to the regular Kenyan investor, who is either in regulated unit trust funds or pension funds, access to high returns from investment grade PE and real estate markets,” said Edwin Dande, managing partner and chief executive at Cytonn Investments Management (CIM).

The firm said it will use the fund management unit to attract resources from high net-worth investors and pension schemes to real estate and private equity that offer higher returns than bonds, equities, and fixed income.

“We also want a regulated markets business,” he said.

Cytonn’s application to venture into fund management comes a month after CMA, in a circular dated August 22, 2016, ordered asset managers to stop offering cash management products — the practice of handling cash for wealthy clients at a fee.

READ: CMA bars fund managers, stockbrokers from cash business

Mr Dande told the Business Daily that the fund management unit will work independently from the parent firm.

“The licensing of CAM has no bearing at all to the other activities on CIM, which is the holding company that conducts private equity, real estate investments and all other structured products activities, which are collectively and generally not regulated activities; even though they are conducted in legally recognised entities such as limited liability companies or limited liability partnerships,” he said.

A fund manager handles collective investment scheme (such as a unit trust), registered venture capital company or an investment adviser who manages a portfolio of securities.

The licensed fund managers in capital markets are 25.

The requisite share capital for fund managers licence is Sh10 million. Applicants pay a Sh2,500 application fee and CMA timelines provide a turnaround time of 25 working days for those applying for licences.

Cytonn application shows that it has proposed lawyer Madhav Bhalla to chair the upcoming fund management’s board, with other members being Michael Bristow, chairman at Central Depository and Settlement Corporation, and Embu University College principal Daniel Mugendi.

Cytonn declined to reveal how much it is holding under cash management, saying “it would not be proper to disclose the amount because it is a private product in the context of the CMA Act” but added that it is in “the billions generally speaking.”

Following the CMA order on cash management, Genghis Capital is in a quandary about how to refund clients Sh1 billion stuck at the collapsed Chase Bank.

CIC Asset Management, a licensed fund manager, said it was previously holding “more than Sh1 billion” under cash management but the amount is now at “about Sh100 million.”

Other licensed players who were in the cash management business and hence affected by the CMA directive are British-American Asset Managers, Sanlam Investment, and Liberty Holdings-backed Stanlib.