Fund managers net Sh10b in 3 months as Kenyans spread risk

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Fund managers in Kenya reported a Sh10.3 billion increase in investments in the first three months of this year as investors seek to diversify their assets amidst local and global economic headwinds. 

Latest data from the Capital Markets Authority (CMA) indicates that total assets under management by collective investment schemes stood at Sh225.3 billion in the quarter that ended March 2024. 

This represents a five per cent increase from Sh215 billion recorded at the end of 2023 and comes on the back of a renewed push by fund managers to launch new products and services targeted at an increasingly restless investor market. 

Faulu Microfinance Bank yesterday launched its money market fund (MMF), becoming the latest in a string of almost a dozen firms that have unveiled a money market instrument over the last one year. 

The collective investment scheme will allow investors to spread their funds across several money market instruments including short-term government securities, bank deposits and high-grade corporate securities.

Investment schemes

Jubilee Asset Management senior portfolio manager Cliff Bakashaba said collective investment schemes have grown by 30 per cent year on year from a low of Sh61 billion in 2018 to Sh225 billion as of the end of March this year.   

“I would categorise that trend as a takeoff,” he explained. “Now people are more aware of the products that are being offered compared to before, and it shows you that there's still a lot of room to grow based on this trend.”

Bakashaba said the bulk of the new investment uptake has been on money market funds. 

“As it currently stands, about 66 per cent of the entire market is in money market funds which are popular with retail investors.

“If you look at the quantum or the value, you'll likely have institutions taking up a big chunk, but in terms of the number of investors, we are seeing more retail and more individual investors allocating to this segment.” 

In 2022, Jubilee Asset Management entered the retail market through its collective investment scheme offering several products, more recently a US-dollar-denominated money market fund. 

“People have a strong preference for, say, real estate, and this is usually land,” Bakashaba said.

“However, this is not the only option available in terms of asset classes. We have money market instruments, fixed income securities, listed equities, private equity, real estate, commodities, private debt, the list is quite long.”

However, the majority of asset classes on this list remain inaccessible to many retail investors who shy away from high minimum investment amounts and lack adequate knowledge to tap these opportunities. 

The fall of the Kenya shilling against the US dollar over the past 18 months has also fuelled investor appetite for alternative asset classes.

The Kenya shilling exchange rate against the US dollar has risen from 107.8 in 2021, 117 in 2022 and Sh130 yesterday.

This coupled with the pressure from public debt repayments and a recent credit rating downgrade by Moody's is expected to fuel investors’ interest for more avenues to place their bets. 

“If a retail investor wanted to get exposure to offshore opportunities, for instance, they are quite limited,” Bakashaba said.

“However, investment vehicles such as the USD money market fund present an opportunity for offshore investment opportunities and dollar-denominated assets, which diversify one’s risk and exposure in terms of local currency.”

Money market funds are also gaining traction as the preferred investment vehicle for Kenyans in the diaspora who traditionally relied on friends and relatives to help them invest their remittances back home. 

Data from the Central Bank of Kenya, CBK indicates that remittance inflows to Kenya stood at Sh404 billion as at the end of May 2024, a 25 per cent increase from the Sh352 billion reported last year.