The Capital Markets Authority (CMA) of Kenya has announced the approval of six new investment funds, marking a significant milestone in expanding financial opportunities for investors. This strategic move reflects the CMA’s commitment to diversifying investment options and catering to a range of risk appetites, from conservative to high-risk profiles.

The approvals include two high-yield investment funds and four collective investment schemes (CIS), offering a blend of local and international exposure across various asset classes. This development is expected to invigorate the capital markets and enhance investor participation by addressing the diverse needs of retail and institutional investors.

High-Yield Investment Funds

1. Oak Multi-Asset Special USD Fund
   Managed under the Faida Umbrella Fund by Faida Investment Bank Limited, this fund targets medium-to-high-risk investors. It focuses on global sovereign and corporate bonds, alongside derivatives. Designed for investors seeking competitive yields, the fund offers a six-month lock-in period with a settlement window of T+2, providing relatively quick liquidity post-lock-in.
2. DAL High Yield Special Fund
   Formerly operating as the Balanced Fund, this product by Dry Associates Limited (DAL) has been restructured to prioritize high-yield returns. It invests heavily in Kenyan and East African government securities and corporate fixed-income instruments. This move aligns with the region’s growing demand for investments that combine stability with attractive yields.

New Collective Investment Schemes (CIS)

The CMA has also approved four CIS offerings aimed at broadening the investment landscape:

1. Britam USD Money Market Fund
   Managed by Britam Asset Managers Limited, this fund invests in short-term instruments, including government securities and high-quality commercial papers. Its USD denomination makes it an appealing choice for investors seeking low-risk options with moderate returns in foreign currency.
2. Orient Dollar Money Market Fund
   Operated under the Orient Umbrella Fund, this CIS targets low-risk investors looking for capital stability and regular income distribution. Managed by Orient Asset Managers Limited, the fund emphasizes safety and liquidity, catering to those prioritizing financial security over aggressive growth.
3. CIC Global Special Fund
   CIC Asset Management Limited has launched this fund for medium-to-high-risk investors. It employs a balanced approach, focusing on active management of interest rate and credit risks. The fund’s objectives include generating consistent income while achieving capital appreciation.
4. VCG Offshore Opportunities Special Fund
   This highly specialized fund by VCG Asset Management Limited comprises eight sub-funds that target offshore equities, commodities, technology, and multi-asset investments. It primarily caters to high-net-worth individuals and institutional investors seeking global diversification and thematic sector exposure.

Implications for the Kenyan Investment Landscape

The introduction of these funds represents a significant step in diversifying Kenya’s capital markets. By offering options denominated in both Kenyan shillings and US dollars, the CMA aims to attract a broader investor base, including expatriates and foreign investors.

Growth of Money Market Funds (MMFs)

Money market funds (MMFs) remain a popular investment avenue in Kenya, serving as an alternative to traditional savings accounts. With over 40 licensed MMFs operating in the country, they offer competitive returns and immediate liquidity. These funds provide options for both conservative and aggressive investors, often appealing to those who value quick access to their money without waiting for a maturity date.

Increasing Role of the CMA

The CMA continues to play a pivotal role in fostering market innovation while ensuring robust regulatory oversight. Its focus on approving funds that cater to a spectrum of risk profiles underscores its commitment to inclusivity in financial markets. By supporting high-yield funds and low-risk options, the CMA is fostering a balanced investment ecosystem.

Global Investment Trends Reflected in Kenyan Markets

The approval of funds like the Oak Multi-Asset Special USD Fund and the VCG Offshore Opportunities Special Fund highlights a growing trend among Kenyan investors toward global diversification. These funds offer exposure to international markets, including sovereign bonds, global equities, and thematic investments such as technology and commodities.

This trend mirrors global investor sentiment, where diversification and exposure to high-growth sectors remain priorities. The emphasis on offshore opportunities aligns with Kenya’s increasing integration into the global financial system, providing local investors access to international markets previously out of reach.

Impact on Economic Development

The establishment of these funds contributes to Kenya’s economic development by channeling resources into productive investments. For example:

• Infrastructure Development: Funds investing in government securities indirectly support public infrastructure projects, fueling economic growth.
• Capital Market Growth: A broader array of investment options attracts more participants, increasing market liquidity and depth.
• Employment Creation: The expansion of asset management firms and investment funds stimulates job creation in finance, administration, and advisory roles.

Investor Protection and Education

To ensure the safety and confidence of investors, the CMA has instituted stringent regulatory frameworks governing the operation of these funds. Additionally, the authority emphasizes the importance of financial literacy, encouraging investors to understand their risk profiles and align their choices with long-term financial goals.

Future Outlook

Kenya’s capital markets are poised for significant growth, driven by innovation, regulatory support, and increasing investor awareness. The approval of these new funds is expected to catalyze further developments, such as:

• The introduction of more thematic and sector-specific funds.
• Enhanced participation of foreign institutional investors.
• Strengthened financial inclusion through digital platforms offering access to investment products.

As the financial landscape evolves, the CMA’s proactive role will remain crucial in balancing market growth with investor protection. The newly approved funds are a testament to Kenya’s ambition to position itself as a regional financial hub, attracting both local and international investors.

In conclusion, the CMA’s latest approvals underscore a pivotal moment for Kenya’s financial markets. By expanding the range of investment opportunities, the authority is fostering a more dynamic and inclusive financial ecosystem, setting the stage for sustained economic growth and financial empowerment for its citizens.

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photo source: Google

By: Montel Kamau

Serrari Financial Analyst

19th November, 2024