Unit Trusts and Shares in Kenya

Unit trusts is a type of professionally-managed collective investment vehicle that pools money from many investors to purchase securities (shares, bonds and Money market funds).

In Kenya, Unit Trust funds are statutorily entrusted to the Capital Markets Authority and controlled by the Collective Investment Schemes Regulations Act, aimed at protecting the investor.

Kenyans can now invest in Unit Trusts With a minimum of Ksh 480.This is after several fund managers reduced the minimum investment amount required.

A good example of these new products is the I-INVEST product by Old Mutual Kenya Limited.

Old Mutual Unit Trust – Minimum investment amount
Equity Fund Ksh 50,000
Balanced Fund Ksh 50,000
Bond fund Ksh Ksh 50,000
East Africa fund Ksh 50,000
Money market fund Ksh 1,000
Toboa Plan Ksh 1,000
Dyer & Blair minimum investment lump sum
Equity Fund is Kshs.10,500
Other Unit Trust Funds Ksh 50,500

You can sign up for Old Mutual’s I-INVEST by dialing *480# from your MPESA line.

Advantages of Unit trusts
Instead of you putting your money in one stock or investment, fund managers invest the money for you in best performing shares, Treasury bills and bonds and other instruments.
You get to reap the benefits of growth in diversified investments and expertise of fund managers.

Disadvantages of Unit Trusts.
1. Investors are charged a fee regardless of the performance of the funds
2. Individual investors also have little say in which securities have to be included / excluded in the funds.
3. The actual value of a Unit trust share is not as precise as that of the stocks on the stock market.

Shares / stocks
What is a share? A share represent one unit of ownership of the value of a company.You can own shares in a private company or a public (listed) company.

In Kenya, you need a CDS (Central Depository System) Account in order to buy or sell shares of companies listed in the Nairobi Security Exchange.
A CDS account can be opened at any NSE stockbroker or investment bank, with your ID and passport size photo.

A shareholder benefits via capital gains and or dividends. Dividend refers to part of profit that a company distributes to its shareholders. I will not advice you to invest in shares with the sole aim of getting dividends because most companies give less than Ksh 10.00 per share annually.
Investing in shares / stocks with an aim of capital gain is the way to go. For example if you buy 100 shares today and after sometime each share has grown by Ksh 100, you would have made Ksh 10,000.

Share splits: A stock with an excessively high price-per-share will cause the investors to feel that it is out of their reach. To make the shares more affordable to smaller investors, the company will opt for a stock split in order to reduce the price of the stocks. Small investors can actually buy a smaller number of pre-split shares for the same price but they sometimes opt to buy split shares due to the appeal of buying stocks for much lower prices 1.

Bull and Bear Markets
A bear market indicates the continuous downward movement of the stock market. Conversely, a bull market indicates the constant upward movement of the stock market.2

Reading list
1.http://www.kasib.co.ke/investor_education/stockmarket.php?itemID=29
2.http://www.kasib.co.ke/investor_education/stockmarket.php?itemID=30
http://www.kasib.co.ke/ (Kenya Association of Stockbrokers and Investment Banks )

List of fund managers (ordered alphabetically)
Amana Capital Limited
Apollo Asset Management Company Limited
Aureos Kenya Managers Limited
British American Asset Managers Limited
Canon Asset Managers Limited
CIC Asset Management Limited
Co-optrust Investment Services Limited
FCB Capital Limited
Dry Associates Limited
Genesis (K) Investment Management Limited
ICEA Lion Asset Management Limited
InvesteQ Capital Limited
Jubilee Financial Services Limited
Madison Asset Management Services Limited
Old Mutual Asset Managers (K) Limited
Old Mutual Investment Services (K) Limited
PineBridge Investments East Africa Limited
Sanlam Investment Management (K) Limited
Standard Chartered Investment Services Limited
Stanbic Investment Management Services (E.A.) Limited
Zimele Asset Management Company Limited http://www.zimele.co.ke

Get an updated list of Kenya fund managers at Capital Markets Authority website