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The Capital Markets Authority (CMA) has stepped up its surveillance on Unit Trusts, requiring more disclosures from them.
The regulator wants information on where the money managers invest their funds and how they arrive at their investment decisions.
This new requirement follows a growing list of Unit Trusts or collective investment schemes that have made bad investment decisions deliberately, leading to loss of investors’ funds. Some fund managers colluded with third parties to swindle clueless investors.
As battles between CMA and some Unit Trust Schemes rage in court, watching helplessly are irate investors, some who have lost their cash.
Collapsed retailer Nakumatt Holdings, delisted Athi River Mining, and troubled Chase Bank and Imperial Bank, are some of the firms that swallowed investors’ cash after fund managers purchased commercial papers and corporate bonds from them./
According to CMA Acting Chief Executive Mr. Wycliffe Shamiah, the regulator is now demanding more detailed quarterly reports from the fund managers.
CMA will also determine who should make investment decisions between the fund manager and the investment committee of a particular unit trust.
Latest data from the Capital Markets Authority(CMA) indicates that it had licensed 24 collective investment schemes as at September 30th, 2019. However, only 19 are currently active while 5 are inactive.
In the third quarter report, 2019, the total asset under management by these Unit Trusts amounted to KSh 71.4 billion, being a 7.7 percent increase from KSh 66.32 billion reported in the previous quarter.
CIC Unit Trust Scheme had the highest asset under management of KSh 27.51 billion which represents 38.53per cent of the industry’s total assets. The least portion of the total assets under management at KSh 12.1 million is managed by Coop Trust, which began operations in Q2, 2019.
In the quarter ended September 2019, 47.42 per cent of the total assets under management by these collective investment schemes was invested in government securities. These include treasury bonds, treasury bills and infrastructure bonds.
The least amount of assets by these schemes was at 0.45per cent, held in offshore investments.
A unit trust is a form of collective investment vehicle, constituted under a trust deed, a unit trust pools investors’ money into a single fund, which is managed by a fund manager.
CIC Unit Trust Scheme has the largest portfolio at KSh 27.51 billion as at 30th September, 2019. It is followed by Britam Unit Trust Scheme (KSh 8.72 billion), ICEA Unit Trust (KSh 8.01 billion), CBA Unit Trust (KSh 6.95 billion), Old Mutual Unit Trust (KSh 6.28 billion), and Africa Alliance Unit Trust (KSh 2.01 billion).
Others include Sanlam with assets worth KSh 2 billion, Madison Asset Unit Trust (KSh 1.59 billion), Dry Associates (KSh 1.62 billion), Zimele (KSh1.06 billion and Nabo (KSh 1.11 billion)
Those with total assets below KSh 1 billion as a 30th September, 2019 include Amana, Equity Investments, Genghis, Apollo, Cytonn, Alpha Africa and Co-op Trust.
In a unit trust, money from many investors is pooled together and invested in a portfolio of money market instruments, bonds, shares and other authorized securities depending on the fund’s objectives.
Unit trusts are often divided into 4 Main Types-Money Market Fund, Balanced Fund, Equity Fund and Bond Fund.