Increased retail investor appetite for actively managed investments continues to drive the expansion of fund managers, with more players joining the industry.
According to data from the Capital Markets Authority (CMA), five new fund managers have joined the scene in the 12 months to the end of September this year, while the markets regulator has approved the creation of 12 new unit trust products over the same period.
The newly licensed fund managers are Lofty Carbon Investments Limited, CPF Asset Managers, Spearhead Africa Asset Management Limited, ALA Capital Limited and MKM Capital Limited.
At the same time, the bulk of new approved products has covered fixed-income funds and dollar funds, mirroring investor interests around returns offered by government securities and forex gains represented by a weaker local currency.
Fund management fees usually average to about two percent of assets under management, meaning a fund manager will ideally make Sh2,000 for every Sh100,000 invested by a client. The more assets a firm oversees, the more fees it earns.
According to Zimele CEO Isaac Njuguna, fund managers have been angling to take advantage of the opportunity represented by millions of retail investors who are looking to save and invest through active intermediaries.
“When you look at the industry right now and what is possible, the number of fund managers is not very huge when you consider there are about 25 million Kenyan adults, the majority of whom are ordinary savers and investors who would naturally find their place within unit trusts,” he noted.
Fund managers nevertheless mostly offer similar products with the bulk of assets packed in money market funds which invest primarily in bank fixed deposit accounts and government securities.
As such, the fund managers have to jostle for differentiation at the marketplace, leading to the emergence of unique offerings by each player amidst tight competition for clients.
“The key thing is on how you differentiate yourself from the rest and the only way to do that is by presenting a unique proposition. The industry is ripe for transformation but only if fund managers can get connected to the wider market,” added Mr Njuguna.
Data from the CMA puts the value of assets under management by collective investment schemes or unit trusts at Sh175.9 billion in the quarter ended June, a 1.7 percent increase from Sh164.2 billion at the end of March.
The markets regulator listed 27 unit trust schemes in the period with CIC, NCBA and Sanlam leading the way by size of assets under management with market shares of 17.4 percent and 10.3 percent respectively.
The fund management business has proved to be a cash-cow for investment firms with CIC Asset Management for instance booking Sh1.1 billion in fund management fees in 2022.
CMA says the fund management space remains attractive to players with the ability to innovate and differentiate themselves.
“Many people have asked how many fund managers the market can support. Our rationale is that we want to have this service available as much as it can. The ideas are very different with each fund manager looking at a specific segment of the market. As a regulator, we look at how many diversified market players we have,” CMA chief executive Wycliffe Shamiah observed.