Think unit trusts, investors urged

April 8, 2009
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, NAIROBI, Kenya, Apr 8 – Investors have been urged to shift their focus towards Collective Investment Schemes (CIS) as a means of minimising investment risks and maximising on returns.

Dyer & Blair Investment Bank General Manager for Asset Management Paul Orem told Capital Business that with the stock market experiencing a slump, investors should consider putting their money in the local unit trusts which has shown considerable progress in the past few years.

“Looking at the depressed stock market, this is the right time for Kenyans to invest in the unit trusts whose prices are so attractive,” he said while urging them to take advantage of the low market prices.

A unit trust is a form of investment which pools financial resources together for the purpose of making large-scale investments in a selected portfolio of authorised investments.

This class of investment has recorded significant growth with the number of approved unit trust funds going up from virtually zero in 2001 to 12 in 2008.

The unit trusts also give investors the opportunity to have their investments securely guarded as their portfolio is managed by three major players that – the Fund Managers, Trustees and a Custodian (banks).

This tripartite arrangement follows the collective investment regulation by the Capital Markets Authority (CMA) which was effected in 2001 and which ensures that each party plays their exclusive roles in handling the investors’ funds.

These vehicles also give investors an opportunity to invest in specialised and overseas markets which would otherwise be very difficult for an individual to access directly due to limited capital resources and research to gain in-depth knowledge of such markets.

He however complained that the penetration of CIS in the country is still below expectations due to lack of awareness about the products.

The aggregate value of all unit trust funds in the country stands at about Sh20 billion, which is less than two percent of the market capitalisation at the Nairobi Stock Exchange (NSE), he explained.

For Dyer and Blair, Mr Orem said, within a period of three years they intend to grow their two funds to about Sh10 million through the launch of various products in the market.

He however expressed optimism that this category had the potential to grow if more and relevant information is provided to the public.

“Whether you sell newspapers or vegetables, unit trusts are very affordable to this category of people because of the minimum amount of investment required,” he said adding that it gives investors an opportunity to diversify their portfolio.

Just like any other type of investment which has its pros and cons, Mr Orem said the performance of the fund is affected by the market risk and if an investment bank is not in compliance with the investment guidelines, then this can cause problems with the regulator which would impact negatively on the product.

However, he maintained that the advantages outweigh the products’ disadvantages in the market.

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