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Kenyans pile into unit trusts to sidestep inflation – Business Daily

Retail investments in pooled funds have grown 152 per cent over the last five years to Sh140.6 billion in the first quarter of 2022 as Kenyans seek to protect their savings from inflation.
The Capital Markets Authority (CMA) chief executive Wyckliffe Shamiah says growth from Sh55.7 billion in March 2017 has also been driven by the ease of entry and withdrawal into Collective Investment Schemes (CIS).
Rising inflation has the effect of eroding the value of cash holdings especially when they do not earn lucrative interest and is a big concern in a market such as Kenya where the rate on bank savings account is 2.52 percent against an inflation rate of 7.9 per cent.
With as little as Sh1,000, Kenyans can put their money into unit trusts, for investments overseen by a licensed fund manager and custodian as well as a trustee.
These are small savers representing the broader economy and a wide range of aspiring individuals who lack the sophistication to invest in capital markets and so elect unit trust to do so on their behalf.
“The continuous growth of unit trust in Kenya is testament to the increased investor awareness on the ease of entry and withdrawal of funds by investors as well as the appeal of earning returns on savings that are competitive enough to beat inflationary erosion,” said Mr Shamia in the quarterly statistical bulletin.
Unit trusts are relatively safe in that they diversify investment stocks, bonds or other approved asset types, conduct regular audits and have a fund manager, custodian and a trustee licensed by the regulator.
Fund managers are able to spread risk by investing in a diversified portfolio of securities – something that is often difficult for an individual investor to achieve with limited funds.
The pooled funds are also very liquid, meaning that investors can withdraw their funds at short notice, often within just a couple of days.
According to the CMA’s most recent Quarterly Statistical Bulletin, as of March this year, there were 20 active and regulated unit trusts including CIC, Coop Trust, ICEA Lion, Britam, NCBA, Old Mutual, Stanlib, Madison, Dry Associates, Zimele, Amana, Equity, Genghis, Cytonn, Nabo, Apollo, African Alliance, and Alpha Africa.
CIC Unit Trust Scheme has the highest assets of Sh56.92 billion which represents 40.46 per cent of the entire industry followed by the NCBA Unit Trust Scheme which managed Sh19.76 billion.
New players are making an entry into the segment including Kweli Capital Limited whose application for consent to register the Amaka Unit Trust Scheme was granted by the regulator.
Safaricom is also gunning for this retail wealth management product with CEO Peter Ndegwa saying they have received regulatory approvals and should expect an official launch soon.
Safaricom is expected to partner with a fund manager already licensed by the CMA, who will also approve the new product.
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Joseph Muongi

Financial.co.ke was founded by Mr. Joseph Muongi Kamau. He holds a Master of Science in Finance, Bachelors of Science in Actuarial Science and a Certificate of proficiencty in insurance. He's also the lead financial consultant.