The number of retail investors with holdings in collective investment schemes has more than tripled to 257,166 at the end of last year from 84,050 in September, 2012.
The growth in the number of unit trust holders has coincided with a 379 percent growth in the schemes’ assets under management to Sh155.91 billion from 32.53 billion over the period, according to data from the Capital Markets Authority (CMA).
The regulator has attributed the growth in the unit trust investor base to the preference for indirect investing through experts.
“Retail investors seem to prefer investment through unit trusts with professional services versus direct investments at the Nairobi Securities Exchange (NSE),” the CMA stated.
Investing directly often requires more knowledge and higher investable funds for one to achieve diversification and risk management.
Despite the growth in the number of investors in unit trust funds, they are still substantially smaller than retail investors at the Nairobi Securities Exchange.
Data from the Central Depository and Settlement Corporation (CDSC) shows the number of NSE local individual investors stood at 1,936,795 in the quarter to December 2022.
Unit trusts are collective investments that are priced, bought and sold in pieces that represent the composition and performance of the underlying assets.
Firms offering these financial products pool funds from a group of investors and allocate the capital to various assets including fixed bank deposits, treasury bills and listed equities. They accept investments as low as Sh500.
Customers can choose funds that invest exclusively in fixed-income securities or those that add listed equities based on their risk tolerance.
The funds are valued daily and clients can choose to invest or exit as they wish.
The liquidity offered by the schemes is one of their main selling points, giving customers access to their money in a matter of days.
The growth of collective investments in the country has been primarily emboldened by digitization with many unit trust investors basing their investments on mobile and online applications.
Additional data from the CMA shows the sector regulator had licensed 20 Unit Trust Funds as of September last year including CIC, NCBA, ICEA, Sanlam, British American, Old Mutual, Dry Associates and Coop.
Other approved mutual funds are Nabo Capital, Madison, Zimele, Absa, African Alliance Kenya, Apollo, Genghis, Cytonn, Orient Collective Investment, Equity Investment Bank and Amana and Wanafunzi.
CMA says the licensing of many fund managers has made more asset classes available while crediting innovation including Fintechs for developing new products that have been appealing to retail investors.
The unit trust primarily invests in government securities and fixed deposits with the latter representing the bulk of the mutual fund assets at 40.62 percent at the end of September or a respective Sh63.3 billion.
