In line with Capital Market Regulations (2002) Part IV (32), Unit Trust Funds Managers released their Q2’2020 results. As per the results, the industry’s overall Assets Under Management (AUM) grew by 15.1% to Kshs 88.1 bn as at the end of Q2’2020, from Kshs 76.5 bn as at the end of Q1’2020. CIC Asset Managers remained the largest overall Unit Trust Fund Manager with an AUM of Kshs 36.3 bn in Q2’2020, from an AUM of Kshs 29.7 bn as at Q1’2020 translating to a 21.9% AUM growth.
During the period under review, Money Market Funds continued to be the most popular product in terms of market share, accounting for Kshs 78.9 bn equivalent to 89.6% of all the funds under management by Collective Investment Schemes for the quarter ended 30th June 2020, an increase from 88.0% in Q1’2020. The total AUM for the fund grew by 17.2% to Kshs 78.9 bn in Q2’2020, from Kshs 65.7 bn in Q1’2020. The highest yielding Money Market Fund was Cytonn Money Market Fund with an average yield of 10.8%, followed by Zimele Money Market Fund, which recorded an average yield of 9.9%.
Unit Trust Funds assets recorded a growth of 15.1% in Q2’2020, compared to a growth of 1.1% in Q1’2020, while the listed bank deposits grew by 18.5% in Q2’2020 compared to a growth of 14.3% recorded in Q1’2020. Key to note, bank deposit growth at 18.5% outpaced UTFs growth of 15.1%, and save for the year 2019, bank deposit growth usually outpace UTFs growth, an indication that our capital markets potential and growth remains constrained. Additionally, Kenya’s Mutual Funds / UTFs to GDP ratio at 5.4% is still very low compared to global average of 61.8%, showing that we need to improve and enhance our capital markets. According to World Bank data, in well-functioning economies, businesses rely on banks for just 40.0% of their funding with the larger percentage of 60.0% coming from Capital Markets. However, in Kenya businesses rely on banks for a staggering 99.0% of their funding; with less than 1.0% coming from Capital Markets. Therefore, in order to improve our Capital Markets and stimulate its growth, we recommend the following actions;
As Money Market Funds continue to lead among unit trust products accounting for 89.6% of the total Unit Trust Funds in Q2’2020, there is need to leverage more on innovation and digitization in order to further propel the growth of MMFs in Kenya. We believe that amidst the Coronavirus pandemic, returns for Money Market Funds will remain stable with a bias to a slight increase upwards should rates on government securities increase. They will also remain the most liquid of all mutual funds providing a short-term parking bay that earns higher income yields compared to deposits and savings accounts.
For more information, please see our Unit Trust Funds Performance – Q2’2020 topical.
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