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Recent Topicals

Unit Trust Funds Performance in First Half 2019

Sep 22, 2019

Unit Trust Funds, “UTFs”, are collective investment schemes that pool money together from many investors and are managed by professional Fund Managers, who invest the pooled funds in a portfolio of securities to achieve objectives of the trust. Following the release of Unit Trust Fund Managers’ results for H1'2019, we examine the performance of Unit Trust Funds, as they are among the most popular investment options in the Kenyan market. Further, we narrow down to analyze the performance of Money Market Funds, a product under Unit Trust Funds, currently the most popular in terms of Assets Under Management, with 85.2% of the UTF market. In our previous focus on Unit Trust Funds, we looked at the FY’2018 Performanc...

Cytonn Note on the Monetary Policy Committee (MPC) Meeting for September 2019

Sep 18, 2019

The Monetary Policy Committee (MPC) is set to meet on Monday, 23rd September 2019, to review the prevailing macro-economic conditions and make a decision on the direction of the Central Bank Rate (CBR). In their previous meeting held on 24th July 2019, the MPC maintained the CBR at 9.0%, citing that the economy was operating close to its potential and inflation expectations remained anchored within the target range, despite the possible spill-overs of the food and fuel price increases, thus the prevailing monetary policy stance remained appropriate. This was in line with our expectations as per our MPC Note, informed by the country’s macroeconomic fundamentals, which had remained stable as well as sustained optimism on the economic growth prospects, as evidenced by: Inflation expectations, which had remained within the target range of 2.5% - 7.5%, coming in at 5.7% in June...

Focus of the Week: Home Ownership Savings Plan, “HOSP”, Schemes in Kenya

Sep 15, 2019

Housing is an important aspect of the economy. However, this has been a challenge in Kenya with a housing deficit of 2.0 mn units, with demand growing at 200,000 units per annum, but supply only providing 50,000 units per annum as per the National Housing Corporation (NHC). The Ministry of Housing indicates that 83.0% of the existing housing supply is for the high income and upper-middle-income segments, with only 15.0% for the lower-middle and 2.0% for the low-income population. The Kenyan Government, through their Big 4 Agenda, which covers affordable housing as one of the pillars have, therefore, been seeking to deliver 500,000 units by 2022, costing between Kshs 0.6 mn and Kshs 3.0 mn aimed at 74.5% of Kenyans earning below Kshs 50,000 per month. However, financing for end-buyers towards the purchase of affordable housing remains a challenge in Kenya, both on the absolute value of the unit, and the financing structures available for a first-time buyer to access capital towards t...

Capital Markets as a Catalyst for Economic Growth

Sep 8, 2019

Economic growth is largely influenced by factors such as capital, labour and technology. A well-functioning financial system permits an economy to fully exploit its growth potential, as it ensures that the best investment opportunities receive the necessary funding, while inferior opportunities are denied capital. We have previously covered this topic in our focus on The Role of Capital Markets in Economic Development, where we investigated the role capital markets play in economic and social development, and concluded on the need to develop our capital market so as to realize both economic and social-development goals. This week, we extend that Focus, as we investigate the current state and depth of the Kenyan Capital markets. In addition, we highlight some of the key challenges affecting the development of the capital markets, and the proposed solutions, as we continue to analyze how...

Investment Options for Your Pension Upon Retirement

Aug 25, 2019

For many, the idea of retirement means transitioning into a more relaxed lifestyle, and having time to enjoy all the things we did not have time for before retirement, such as our hobbies, family and friends, travel, and recreational activities. It is therefore important to protect what you have saved or invested to ensure that you will have enough income throughout your retirement; after all, you worked hard to get to retirement. To guarantee income upon retirement, it is important to join a Retirement Benefits Scheme while still in your working years and contribute towards your retirement. On retirement, one should aim to have an income replacement ratio of about 75%. Currently, the average income replacement ratio in Kenya is below 40% and there is need for people to enhance their retirement savings. Depending on the type of Retirement Benefits Scheme you belong to, you may access your retirement benefits as either a lump sum, or a combination of a lump sum and periodic p...