The number of investors in unit trusts or collective investment schemes has increased to overtake stock market accounts, underlining the attractiveness of the liquid assets whose returns have risen to highs of 15 percent in recent months.
Latest data by the Capital Markets Authority (CMA) shows the number of Kenyan investors putting their money in unit trusts rose seven percent to 1,299,300 in the three months to September 2024. This is after the ranks of those in unit trusts increased by 88,176 in the period.
The number of local investors in equities meanwhile shrank by 132 to 1,286,500.
“The number of investors in the various collective investment schemes (CIS) funds has continued to grow steadily over time, buoyed by increasing awareness in the market to save and invest especially, post covid era,” said the market regulator in the Capital Markets Soundness Report published quarterly.
The unit trusts, including money market funds (MMFs), fixed-income funds, equity and bond funds, managed assets valued at about Sh316.4 billion as of June 2024.
Their increased popularity came at a time when many of the funds delivered double digit yields, while the stock market was still reeling from a longstanding bear run that saw investors counting heavy losses. Companies where long-term investors have recorded actual or paper losses include Safaricom, ARM Cement, BAT Kenya, Scangroup, Kenya Airways, Britam, TransCentury and Sanlam Kenya.
“Pre-Covid, the interest on money market funds, which made up almost 90 percent of unit trusts, was basically less than 10 percent,” observed Charles Miano, senior investment analyst at Nabo Capital which is one of the entities licensed by the CMA to offer unit trusts.
“Over time, especially after the Russia-Ukraine war in 2022, there was a spike in yields or interest rates, and the rates on money market funds went up quite significantly, some going past 10 percent all the way to over 15 percent last year.”
There are currently 54 approved collective investment schemes in Kenya, managing a total 232 funds both in the Kenyan shilling and in US dollars and cutting across the different fund categories.
The most popular of these trusts are the money market funds, which are mostly managed by insurance companies, commercial banks, investment banks, and investment companies.
Yields from the equity markets, on the other hand, are nowhere close to the 2015 peak despite the recent bull run sparked by the strengthening of the shilling, improved earnings by blue-chip firms and falling interest rates.
Many of the stocks listed on the Nairobi Stock Exchange (NSE) are net losers over the last decade, reducing appetite for them in the face of emerging new options for local investors.
Equities were once the go-to investment avenue for Kenyans, with the NSE playing a central role in facilitating such investments, especially in the pre-Covid era when the unit trusts were just beginning to pick pace.
Other than retail investors, asset holders in the country’s equities market, including from the East African Community (EAC) region and other foreign countries, have also increasingly withdrawn from the domestic market.
The unit trusts, in contrast, have been garnering more investors by the day, growing their assets under management by 54 percent to Sh316 billion as of September last year from Sh205 billion in the same month in 2023.
Kenya’s unit trusts market has advanced faster than its neighbours’. In Uganda, for instance, collective investment schemes currently have just 103,950 investors holding an equivalent Sh111 billion assets under management as of last September.
Other than the rising awareness of the funds, the CMA has also previously attributed the growth in their attractiveness to the “risk diversification benefit” they offer to investors.
Mr Miano argues that increased marketing of unit trusts on social media by financial influencers and companies has also contributed to their gaining traction in the Kenyan market.
“The rise in use of technology in unit trusts has also further simplified access to the trusts, increasing access and liquidity. Now you don’t need an intermediary to invest or liquidate your unit trust accounts, you can do it from your phone at home,” he added.
