NAIROBI, Kenya, Sept 16 – The Nairobi Stock Exchange (NSE) is urging investment banks to come up with Collective Investment Schemes (CIVs) to address rising interest in the capital markets.
NSE Chief Executive Peter Mwangi said on Wednesday that having many retail investors in the market makes managing investments very difficult.
He gave an example of the Johannesburg Stock Exchange (JSE) that has a market capitalisation of $690 billion, but with only slightly over one hundred thousand trading accounts.
“This clearly illustrates that there are far too many individual investor accounts considering the size of our market, and this presents both logistical and operational challenges to the current infrastructure.”
“CIVs are the most prudent way for a new investor to the stock market to derive the best value from it and acquaint themselves with its workings,” he added.
The Initial Public Offer (IPOs) boom, has witnessed a rise in the number of investors in the market resulting to a surge of the number of Central Depository System (CDS) accounts.
“We have managed to recruit very many new investors but we need to manage the way the market develops going forward.”
Mr Mwangi acknowledged that Kenyans have always been into the culture of collective savings, and views it as a ready market for investment banks to tap into.
“For retail investors, it makes a lot of sense to invest in a CIV because they have access to professional management and they can access a well diversified portfolio.”
He was speaking during the launch of CFC Stanbic Investment Limited two unit trust funds – Money Market Fund and CFC Simba Fund – and said such offerings would cut down investor registry and improve efficiency in the market.
Kenneth Kaniu an Investment Manager with Stanbic Bank said the two collective scheme products aim at providing cost effective access to a wide range of equities and bonds.
He cited high level of demand in the market for unit trusts coupled with diminishing interest in shares.
“They offer flexibility because they don’t have fixed investment periods and investors can switch their asset allocation from one fund to another,” Mr Kaniu said.
He said in terms of risk and return, the CFC Simba Fund would help protect an investor against inflation, targeting those who want to grow their money above the level of inflation.
“Beating overall inflation is difficult because the way the consumer price index is constructed, 50 percent is skewed towards food. Unfortunately we do not have any investments that actually match performance of food price or oil price.”
The minimum investment for the Simba Fund is Sh100,000 with a minimum additional investment of Sh20,000 while the Stanbic Money Market Fund has a minimum investment of Sh1 million and a top up investment of Sh50,000.
Mr Kaniu also welcomed cross listing of shares in the East African community saying it would open up the access to a wider investment pool to raise more money and raise their profile of investors regionally.