Unit trusts: How not to lose your hard-earned cash

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The assets unit trusts or collective investment schemes managed grew by Sh8.4 billion. PHOTO | SHUTTERSTOCK

Over the last few years, Kenyans have been increasingly turning to unit trusts, which are pooled funds run by investment schemes, as their personal finance investment vehicles owing to their relatively low risk and certainty of investment returns.

Data from the Capital Markets Authority show collective schemes grew their assets by Sh9.3 billion or 6.3 percent to Sh155 billion in the period that ended September 2022.

Unit trusts have gained popularity due to the ability to invest as little as Sh1,000 using mobile phones, their ease of entry, and the withdrawal of funds.

However, investors remain vulnerable to scams and fraud.

Britam Group CEO Tom Gitogo, whose firm runs a unit trusts investment scheme advises on how to minimise personal risks.

“If the rate offered is quite high compared to peers or similar funds, be very cautious. Seek advice. Lean towards investing with well-established organisations that take governance seriously, comply with regulations, and have a brand to protect. Avoid investing in funds promoted by “individual”-led entities,” says Mr Gitogo.

Safe investment

The first factor to consider, he says, is the experience and reputation of the fund manager. A fund manager with a proven track record in managing unit trusts is more likely to provide you with a safe investment.

“Avoid the fly-by-night fellows promising heaven,” Mr Gitogo says, noting that On average, unit trusts in Kenya will charge you an annual management fee of between two and 2.5 percent plus an initial fee which varies with the products.

Mr Gitongo says unit trusts remain one of the best wealth-creation vehicles for both young and experienced investors.

“There are still a lot of Kenyans who have their money sitting in low-interest savings accounts with banks, or worse, idle cash in current accounts earning nothing. They should consider investing in money markets offered by Capital Market Authority-regulated fund managers.”

The Britam Group’s boss says the best investment advice is that one should ‘start early, with whatever amount you have, and diversify as your portfolio grows’.

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