Companies

Cytonn’s unit trust suffers Sh188m exits on brand hit

CYTONN1

Cytonn Investments chief executive Edwin Dande. FILE PHOTO | NMG

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Summary

  • Investors withdrew Sh188.3 million from Cytonn Unit Trust Scheme which suffered the biggest outflow in the quarter ended June, according to data from the Capital Markets Authority (CMA).
  • The client exits came as the trust’s parent firm Cytonn Investments Management battled CMA and investors in its other funds who have been unable to access billions of shillings.
  • Cytonn Unit Trust Scheme ended the period under review with Sh771.9 million in assets, down from Sh960.2 million in the preceding quarter.

Investors withdrew Sh188.3 million from Cytonn Unit Trust Scheme which suffered the biggest outflow in the quarter ended June, according to data from the Capital Markets Authority (CMA).

The client exits came as the trust’s parent firm Cytonn Investments Management battled CMA and investors in its other funds who have been unable to access billions of shillings.

Cytonn Unit Trust Scheme ended the period under review with Sh771.9 million in assets, down from Sh960.2 million in the preceding quarter. This represented a decline of 19.6 percent.

The Cytonn investment brand has taken a hit after defaults running into billions of shillings which the asset manager has blamed on a slowdown in the real estate market where it had invested most of the money.

Cytonn has also been accused of running various investment products with similar sounding names, making it difficult for unsophisticated clients to know their risks and whether they are regulated.

Cytonn High Yield Solutions LLP and Cytonn Real Estate Project Notes LLP were recently placed under administration.

The asset manager was promising double-digit returns in the unregulated funds, attracting more than 3,500 retail investors. The fallout appears to have impacted Cytonn’s unit trust scheme which is regulated by CMA.

Fund managers with shrinking assets face reduced fees and higher costs as they lose economies of scale, with the opposite being true for firms growing the size of their portfolios.

Other schemes that registered outflows in the period are Apollo Unit Trust Scheme, Amana Unit Trust Funds and Equity Investment Bank.

Apollo’s assets dropped by Sh51.1 million or 7.4 percent to Sh634.7 million, followed by Amana whose assets shrunk by Sh30.5 million or 40.3 percent to Sh45 million.

Amana is facing an existential crisis, with its assets collapsing from more than Sh1 billion it held in 2018. Clients have been yanking money out of Amana after it lost the Sh275 million it had invested in a commercial paper issued by the collapsed Nakumatt Holdings.

Equity’s portfolio shrunk by Sh8.6 million or 2.8 percent to Sh289.3 million.