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Capital Markets

Value of unit trust assets rise 68 p.c on share price gains

Nairobi Stock Exchange: The value of assets under management by unit trust firms increased by 68 per cent last year boosted by share price gains at the NSE. Photo/FREDRICK ONYANGO
Nairobi Stock Exchange: The value of assets under management by unit trust firms increased by 68 per cent last year boosted by share price gains at the NSE. Photo/FREDRICK ONYANGO 

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 went up by Sh11 billion to Sh28 billion in 2010 from Sh16.8 billion in 2009.

Total revenue of the fund managers — which includes unrealised gains on securities — increased more than four times or by Sh2.9 billion to Sh3.8 billion compared to the 2009 level of Sh868 million.

The industry’s profits after tax soared to Sh3.3 billion from Sh446 million, as British American Asset Managers (BAAM) toppled Old Mutual to become the market leader in the industry measured by assets under management.

BAAM’s assets under management went up by 60 per cent to Sh9.2 billion giving it a 32.7 per cent market share as at the end of 2010 compared to the previous year’s Sh5.7 billion where it had a 34.3 per cent market share.

On the other hand, Old Mutual assets under management went up 12 per cent to Sh8.7 billion to give it second position with 30.8 per cent market share compared to the previous year when its Sh7.7 billion assets under management gave it a 46 per cent market share.

BAAM’s managing director Dominic Kiarie said that the firm’s growth was realised from its large network of over 1,000 financial advisors, and the use of technology to work to gain market share over a six-year period.

“The main driver is our distribution network and British American Group’s network of over 14 branches represented in key town’s country wide which makes our services accessible to current and prospective clients,” said Mr Kiarie.

Third position

He said that the company had installed a software system that enables clients to view their investment accounts online.

BAAM limited its equity investments to businesses with strong growth outlook to safeguard against volatility of share prices, Mr Kiarie said.

The Stanbic Investments moved to third position— its assets under management going up more than 16 times to Sh5 billion giving it a 17.8 per cent market share compared to last year’s Sh303 million where it held seventh position.

African Alliance Kenya Management, ICEA, Zimele Asset Management and Commercial Bank of Africa took the fourth, fifth, sixth and seventh positions with 8.2, 5.5, 2.3 and 1.9 per cent market share respectively.

Dyer & Blair, Suntra and Standard Investment Banks took the last three positions and shared out the remaining market share of less than one per cent.

BAAM which according to Mr Kiarie is also eying the Uganda market after its parent company also recorded Sh1.56 billion in profits after tax— the highest in the industry some of which he said was retained in the portfolio and some of which was paid out to investors according to the specifics of the particular fund.

Old Mutual unit trusts collectively posted Sh1.52 billion in profits after tax followed by ICEA which posted Sh120 million while all the other unit trusts posted Sh195 million in profits after tax.

A collective investments scheme or unit trust allows an investor to invest in a portfolio of stocks or bonds or other money market instruments which are professionally managed by a fund manager who will usually try to exceed a certain benchmark with the returns of the fund.

It usually has a minimum amount to be invested and although unit trusts are required to publish some of their data, historical average returns to investors over a period of time usually presented in percentages is not readily available.

Fluctuations

Money market funds in Kenya posted a return of between 3.8 and 8.9 per cent beating rates paid out by banks; balanced funds a return of between 24 and 34 per cent while equity funds posted returns of between 16 and 25 per cent.

“Though past performance is not an indication of future performance one can get it from the respective fund managers,” said Zimele Asset Management Company analysts, adding that the rates published daily in the papers are also subject to fluctuations in the market.

“For example if the rates go up you will benefit and if the rates go down this will also get reflected. Entry level really matters because it tells you how accessible the fund is,” said Zimele analysts whose funds have a threshold of as low as Sh250 and which can also be paid through electronic means such as M-Pesa.

Mr Kiarie said the industry was however working on an initiative of reporting actual returns achieved by various unit trust funds to be available most likely by the end of the year.

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