Unit trusts profit from Nairobi bourse share price gains

The value of assets under management by unit trust firms in Kenya rose by 24 per cent last year boosted by share price gains at the Nairobi Securities Exchange (NSE), new data shows.

British American Insurance Company (Britam) maintained the lead with the highest assets under management in unit trusts, ahead of its biggest rival Old Mutual for a second year running.

Published financial results for 13 asset managers out of 16 — licensed by the Capital Markets Authority to run collective investment schemes, which consist of unit trusts among other vehicles — show that total assets under management rose by 24 per cent to Ksh29 billion ($337.5 million) in 2012 from Ksh23.4 billion ($276 million) the previous year. This was as a result of a sharp rise in share prices, higher bond valuations and investors putting in more funds into unit trusts.

In 2012 the NSE 20 Share Index, which tracks the prices of the 20 most traded shares at the Nairobi Securities Exchange (NSE), rose by 28.95 per cent while the NSE All Share Index rose by 39.42 per cent.

The value of all listed companies, measured by market capitalisation jumped by Ksh403.76 billion ($4.69 billion) and closed at Ksh1.16 trillion ($13.5 billion) at the end of 2012, a reflection of the increase in share prices.

“The NSE was up close to 40 per cent while average yields on government securities were on average above 10 per cent. This helped with the growth of the value of equity assets we manage. Additionally, we also experienced net inflows from our investors putting more money into our products,” said Edwin Dande, Britam Asset Managers’ managing director.

Total income for the 13 unit trusts rose to Ksh4.8 billion ($56.1 million) last year from a loss of Ksh931.1 million ($10.9 million) the previous year while profit after tax rose to Ksh4.1 billion ($48.4 million) from a combined loss after tax of Ksh2.4 billion ($28.2 million).

Unit trusts allow an investor to put money in a portfolio of stocks or bonds or other money market instruments, which are professionally managed by a fund manager who will usually try to exceed a certain benchmark with the returns of the fund.

Categories

Unit trust funds are generally of two major categories; the income funds and the growth funds. Income funds are those that provide a consistent inflow of earnings to the investor, either monthly, quarterly, semi-annually or annually. Growth funds, on the other hand, do not provide quick gains but only give long-term capital appreciation.

Ordinarily, unit trusts offer alternative options for investors looking to diversify from a volatile stock market and who have limited capital to acquire higher volumes for greater returns.

CIC Asset Management, which ranked eighth in 2011 based on assets under its management surprised other established unit trusts by significantly gaining on market share to attain the fifth position in 2012 ahead of ICEA Asset Management, CBA and Zimele Asset Management.

Britam’s assets under management in unit trusts rose by 21.5 per cent to Ksh9.3 billion ($108.2 million) last year from Ksh7.6 billion ($89.9 million) in 2011 while Old Mutual’s rose by 17.82 per cent to Ksh7.8 billion ($91 million) from Ksh6.6 billion ($78.1 million).

Stanlib, which took the third position, saw its assets drop by a marginal 5.87 per cent to Ksh3.6 billion ($42.5 million) last year from Ksh3.8 billion ($45.7 million) the previous year while African Alliance’s rose by 6.74 per cent to Ksh2.4 billion ($28.1 million) from Ksh2.2 billion ($26.6 million) over the same period.

All funds with equities, with the exception of one managed by Standard Investment Bank, Madison Asset Managers and Amana Capital made profits in 2012 compared to losses in 2011 as share prices soared lifting the value of assets under management.