Follow

Agency nods to bank’s unit trust scheme

By John Otini
Thursday, November 5th, 2020
Capital Markets Authority. Photo/Courtesy
In summary
    • Collective investment schemes have gained traction as Kenyans seek more profitable ways of keeping their cash apart from bank deposits.
    • Rising awareness of unit trusts has also increased participation by investors who want investments that can be recalled for emergencies.

ABSA Bank is set to roll out a collective investment scheme under ABSA Asset Management Limited after the regulator signalled the firm to proceed with registration.

The bank is eyeing a share of the Sh88 billion market, which according to the regulator, is growing rapidly.

“The Capital Markets Authority (CMA) has granted consent to ABSA Asset Management Limited for the registration of Absa Unit Trust Funds,” CMA said in a statement.

The unit will comprise five funds: Absa Shilling Fund, Absa Dollar Fund, Absa Bond Fund, Absa Equity Fund and the Absa Balanced Fund.

Industry data

Industry data shows that the collective investment funds grew 15 per cent to Sh88 billion in the second quarter from Sh76 billion showing immense potential for growth.

ICEA, NCBA and Old Mutual are the third, fourth and fifth largest funds in that order, reflecting the choices investors made on where to store their wealth.

ABSA Asset Management Limited is a fully owned subsidiary of ABSA Bank Kenya PLC is seeking to diversify its revenues after losing its market share in the commercial banking sector to local banks over the years.

High margins offered by government bonds continue to yield attractive returns due to high demand for cash by the Treasury.

“In  the  quarter  ended June 2020, 43.4 per cent of  the  total  assets  under  management  was invested  in government securities,” CMA said. 

A third of the funds went into fixed deposits while 8 per cent was invested in stocks  at the NSE while 7 per cent was in cash and demand deposits.

The top five collective investment schemes control 80 per cent of the assets under management leaving the remaining 15 asset managers to share the remaining 20 per cent.

The quarter experienced a net foreign investor outflow of Sh4.5 billion as compared to an inflow of Sh263 million at the same period last year.

Equity Investment Bank assets under management contracted 16 per cent to Sh329 million making one of the three schemes to lose funds despite a boom in the collective investment market.