The schemes are asking for more time to reorganise their portfolios, with the regulator’s directive aimed at ensuring there is enough liquidity for investors in the funds.
The guidelines targeting valuation, reporting and performance measurement in the schemes came into effect on January 1 last year.
Some collective investment schemes are yet to fully comply with a directive from the Capital Markets Authority (CMA) to limit money market fund investments to assets with a maximum duration of 13 months.
The schemes are asking for more time to reorganise their portfolios, with the regulator’s directive aimed at ensuring there is enough liquidity for investors in the funds.
The guidelines targeting valuation, reporting and performance measurement in the schemes came into effect on January 1 last year.
They are intended to improve transparency in the sector and help investors compare the performance of different funds.
The CMA told the Business Daily that the compliance rate is within expectation given the extensive portfolio realignment required by some funds.
Upon the enactment of the guidelines, some fund managers reported difficulties in reassigning their exposure to some investments that had a long tenor within a short time frame, including commercial papers whose liquidity at the market remains low.
“Not all are compliant with the 13 months directive. Changing includes rebalancing their portfolios and some requested for more time to reorganise the same … the Authority is working with the few entities concerned towards full compliance within the shortest time,” said the CMA.
Investments of less than 13 months would include Treasury bills and bank deposits, given that government bonds have a minimum life of two years while commercial papers and corporate bonds tend to range from four to seven years.
The guidelines also require equity funds and fixed income funds to invest a minimum of 80 percent of their assets in stocks and fixed income securities respectively, while balanced funds are allowed a maximum exposure of 60 percent in any single asset class.
Further, the CMA said that some fund managers are also yet to fully comply with enhanced disclosure requirements that stipulate they sell to investors returns that are net of all fees and charges.
“Most fund managers are compliant with the reporting requirements. We continue to follow up on a case by case basis where there are non-compliances to ensure these are addressed,” the regulator said.
This is meant to standardise reporting and prevent situations where investors are sold a unit trust-based on gross returns, only to learn of deductions for fees and charges much later.
The tighter oversight by the CMA on the sector has come as the popularity of unit trusts continues to grow, with the assets under management for the sector more than doubling from Sh56 billion in September 2017 to Sh126.05 billion in September 2021.
