Capital Markets

Unit trust returns show mixed trends on interest rate jitters

Trading Staff at the Nairobi Securities Exchange. FILE PHOTO | SALATON NJAU | NMG
Trading Staff at the Nairobi Securities Exchange. FILE PHOTO | SALATON NJAU | NMG  

Unit trust returns have shown mixed trends since the beginning of the year amid uncertainty over interest rates and a flat exchange rate.

Five out of 11 money market funds sampled by the Business Daily have recorded a fall in their effective annual rates since the beginning of the year. Another five have recorded an increase, with one unchanged.

Government security yields on short and long-term tenors have generally fallen this year, while those on medium-term papers such as the five-year bond have been rising.

“Yields on the majority of the papers have been on a downward trend, apart from the five-year tenor papers which have witnessed a rise in the current yield,” said Kingdom Securities senior analyst Mercyline Gatebi in a fixed-income note.

The movement in unit trust rates is, however, minimal, with most unit changing by less than one percentage point.

The biggest fall in effective annual rate is on the Sanlam #ticker:PAFR Pesa+ fund, where the annual rate has dropped by 2.7 percentage points to 8.3 per cent since January.

Equity #ticker:EQTY Money market fund’s return is lower by 1.6 percentage points to 4.1 per cent, while that of CIC #ticker:CIC has come down by a marginal 0.8 percentage points to 10.46 per cent.

On the other hand, Dry Associate’s Kenya shilling money market fund is offering a rate of 10.14 per cent, 1.26 percentage points higher than it did in January.

Britam money market fund currently carries an annual yield of 9.99 per cent, up from 9.39 per cent in January.

The flattening growth in unit trust yields is likely to push investors towards other investment classes in the short term, especially with the high inflation and high dividend yields in blue chips stocks.