The Capital Markets Authority (CMA) has introduced new guidelines for Collective Investment Schemes (CISs) meant to standardize investment performance measurement and presentation.
CMA Acting Chief Executive Wyckliffe Shamiah said that the guidelines would address inconsistencies recorded over time and better protect investors.
“These observations and feedback from the market necessitated the development of the new Guidance to enhance the comparability and consistency of information presented in performance reports generated by CISs’,” said Shamiah.
The guidelines, which start next year in January, require fund managers to establish comprehensive, documented investment policies and procedures to govern the valuation of assets held by a CIS.
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It also includes the identifying methodologies used for valuing each type of asset and indicates how performance is calculated, measured, and presented.
Fund managers will also be required to have policies and procedures in place to detect, prevent and correct pricing errors that result in material harm to CIS investors.
Fund managers will be further required to provide performance measurement reports to the Authority and all existing and prospective investors, within 21 days after the end of each quarter.
The Institute of Certified Investment and Financial Analysts (ICIFA) Chief Executive, Diana Muriuki-Maina and the Fund Managers’ Association (FMA) backed the guidelines saying they would enhance accountability and transparency in the reporting of CISs’ performance which will in turn boost investor confidence.
Further, according to the guidelines, portfolios will be valued daily in line with the definition of fair value under International Financial Reporting Standards (IFRS 13).
However, external valuations for real estate investments will be performed by an independent registered property valuer at least once every three years, say the guidelines.
"In determining the total assets under management, fund managers will consider: the aggregate fair value of all assets without double counting any assets, actual assets managed by the fund manager including fee-paying and non-fee-paying portfolios and assets outsourced to another fund manager," say the guidelines.
