In response to the ongoing depreciation of the local currency, Kenyans are increasingly turning to US dollar-based investments as a safeguard against the economic impacts. This trend is being observed both among domestic investors and members of the diaspora.
The surge in interest for dollar-denominated investment products has led to the establishment of various forex investment vehicles by fund managers. Last year, the Capital Markets Authority (CMA) granted approvals to several fund managers, allowing them to launch dollar-denominated money market funds and fixed-income funds. The move came as the Kenyan Shilling experienced its most significant depreciation against the US dollar in three decades.
In a notable development, the CMA granted approvals between April and June for the registration of the Old Mutual Dollar Money Market Fund. Following this, the third quarter of 2023 witnessed the registrations of the ICEA USD Fixed Income Fund and Sanlam USD Fixed Income Fund. Additionally, the CMA approved the registration of Etica USD Money Market Fund, Etica USD Shariah Fund, Etica USD Wealth Fund, Etica USD Fixed Income Fund, and Enwealth Dollar Money Market Fund.
Wealthy Kenyans, in particular, have been accumulating their dollar reserves in banks, reaching a record high of $7.7 billion, as reported recently.
According to the CMA’s statistics on collective investment schemes, the assets under management in dollar-denominated funds surged to Ksh12.3 billion ($75.7 million). This marked a significant increase from Ksh5.1 billion ($31.4 million) recorded in September 2022.
The growing interest in dollar-based investments reflects a strategic move by investors to shield themselves from the adverse effects of a weakening local currency. As the trend continues, fund managers are expected to further diversify their offerings to meet the rising demand for such investment options in Kenya.
By Delino Gayweh
Serrari Financial Analyst
January 29, 2023
