Fund managers running unit trusts have recovered from losses following a rise in assets under their management, which delivered higher fees.
At least four fund managers posted profits for the year ended December after reporting losses in early periods on improved fund management fees.
CPF Asset Managers booked a net profit of Sh19.1 million, reversing a Sh10.4 million loss on higher income, which grew to Sh74 million from Sh6.4 million a year earlier
ICEA Unit Trust reversed a loss of Sh77.7 million to post a profit of Sh210.7 million as income hit Sh242.4 million, while Cannon Asset Managers booked a profit of Sh3.7 million compared to a loss of Sh38 million.
The improved profitability is attributed to the asset growth, which triggered the rise in management fees.
Assets under management jumped 80.9 percent last year to Sh389.2 billion from Sh215.1 billion in December 2023.
This follows a rising appetite for unit trusts, including money market funds, fixed income funds and dollar funds, with investors driven by the double-digit returns and the quest to diversify their portfolio.
“Fund Managers generally charge management fees on AUM they manage, which is usually the main source of revenue. Apart from that, fund managers can also generate income from investment of their assets, which is generally referred to as proprietary position in their balance sheet,” said Etica Capital co-founder Kenneth Maina.
“This income line can be in the form of interest income, capital gains for those that have a position in assets such as treasury bonds.”
Fund managers are allowed to charge up to two percent of a client's assets as fees, according to rules set by the Capital Markets Authority (CMA).
This means that a fund manager earns more income when assets under their watch grow.
Some fund managers faced cost pressure, notably staff salaries, that wiped out the higher fees.
Lofty-Corban Investments saw its 2024 loss grow to Sh42.9 million from Sh31.1 million a year earlier, despite tripling income to Sh23 million.
Its expenses nearly doubled to Sh65.9 million from Sh35.8 million as employee costs jumped Sh40 million from Sh14.6 million a year earlier.
“Most of the fund managers recorded an increase in income or revenue but are facing challenges with their operating models, which led to an increase in operating expenses,” Mr. Maina said
“Given that the fund management fees rate is usually determined at the product incorporation level, fund managers facing high-cost problems will have to re-look at their operating models to achieve efficiency, hence increased or sustainable profitability.”
CMA has licensed 43 fund managers that run 54 collective investment schemes as of December 31, comprising 232 funds.
Etica Capital had a profit of Sh19.1 million from a loss of Sh10.4 million in 2023 as the firm’s income rose to Sh74 million from Sh6.4 million previously.
Africa Alliance Kenya Asset Management and Gen Africa Asset Managers grew profits on higher income like fund management fees, while Mayfair Asset Managers and Jubilee Asset Management narrowed their full-year losses.
