Genghis Capital Limited head of unit trusts Theresa Kaleja, managing director Zafrullah Khan and director Ali Cheema during the unveiling of a unit trust aiming to reach the mass market at the Crown Plaza, Nairobi. Photo/Diana Ngila
By George Ngigi
Posted Thursday, April 25 2013 at 18:46
From http://www.businessdailyafrica.com/
IN SUMMARY
- The Sh500 unit trust deepens competition for retail investors in unit trusts.
- Fund managers have over the past three years strived to attract small investors to unit trust schemes by lowering the minimum investment.
- Unit trusts have been a preserve of investment banks, with Genghis Capital being the first stockbroker to offer the product.
Stockbrokerage firm Genghis Capital has opened a unit trust aiming to reach the mass market with a Sh500 minimum investment plan.
The minimum investment amount deepens competition for retail investors in unit trusts, where Zimele Asset Management’s Sh250 and Old Mutual’s Sh1,000 minimum were previously the lowest entry points.
Fund managers have over the past three years strived to attract small investors to unit trust schemes by lowering the minimum investment amount from upwards of Sh100,000.
Genghis Capital will also be reaching out to Muslims with a sharia- compliant investment vehicle dubbed Gencap Imam Fund.
The stockbrokerage firm, a subsidiary of Chase Group, plans to ride on the geographical reach of its banking arm and on its micro lender Rafiki Deposit Taking Microfinance to sell unit trusts to the mass market.
“We are aware of the fixed costs but we are banking on high volumes. Most people have been asking for better rates than those being offered by the banks,” said Dr Theresa Kaleja, head of Unit Trust at Genghis Capital.
Unit Trusts provide investors an opportunity to invest in a portfolio of stocks or fixed-income securities or both, without directly going to the market themselves. The investors deposit funds with fund managers, who charge them a fee for their services.
Genghis will charge a one-off initial fee of 3.5 per cent, which it will use to settle fees charged by its service providers who include custodians, fund managers and trustees. It will also levy an annual management fee of two per cent.
Unit trusts have been a preserve of investment banks, with Genghis Capital being the first stockbroker to offer the product. The management, however, said it plans to convert the brokerage firm into an investment bank.
(Read: Genghis Capital now starts selling Shariah unit trust)
“By end of year we will have converted into an investment bank. We have to raise capital in order to comply with the regulatory requirement, which we will do from our own funds and fresh capital,” said Zafrullah Khan, the group chairman.
Initially, there were fears of entry into unit trusts due to the high administrative costs but entry of players such as Zimele Asset Management has proved that the retail segment offers a good bargain.
“That is where the potential of unit trust lies as high net worth guys have other means of accessing the market,” said Isaac Njuguna, head of investments at Zimele.
Zimele has a minimum investment option of Sh250 which can be deposited through M-Pesa.
The shariah compliant Iman Fund set up by Genghis has received exemption from the regulator to exceed the 10 per cent cap put on foreign investment.
The fund can invest up to 30 per cent of its portfolio in stocks listed on the Nairobi Securities Exchange (NSE), 60 per cent in unlisted securities and 30 per cent in offshore investments.
Unit trusts generally provide higher returns on savings than bank deposits, but equity funds can also result in losses of initial investments. Currently banks’ savings accounts are yielding an average of 1.65 per cent and 6.5 per cent for the fixed deposit account.
Unit trusts split their funds according to the risk appetite of the contributor, with money markets — composed of Treasury bills and bonds — being for those who are risk averse and equity markets for those who are willing to commit money for longer and are willing to take more risk.
Currently the returns from the money markets are above 10 per cent, with the one year T-bill closing at 12.5 per cent in the last auction.
The equities market has also been vibrant up 15.6 per cent since the beginning of the year.
With the minimum investment in a government securities set at Sh50,000, the pooling of cash from the mass market allows them into a market that they would not access individually.
Investment of huge sums in the equities market also gives the fund managers bargaining power on fees and prices.
gngigi@ke.nationmedia.com
By George Ngigi
Posted Thursday, April 25 2013 at 18:46
From http://www.businessdailyafrica.com/
