Commercial banks have moved to establish in-house collective investment schemes or unit trusts, taking the battle for assets under management (AUM) to the door of traditional fund managers who are mostly insurance firms.
Stanbic Bank Kenya has been the latest lender to join the unit trusts party, having launched a new collective investment scheme at the end of August that includes a money market and fixed income fund.
The lender joins NCBA, Absa Bank Kenya, Co-operative, KCB and Equity in offering the asset class to customers.
Standard Chartered Bank Kenya, meanwhile, offers unit trusts through a partnership with insurer Sanlam.
Commercial Bank of Africa (CBA) which merged with NIC to form NCBA, Equity and Co-op Bank were the first to break ground on the asset class by having established unit trust businesses as at June 2019.
Assets of unit trusts managed by five banks – NCBA, Absa, Co-op Bank, KCB and Equity – reached Sh55.2 billion at the end of June this year, representing 21.7 percent of the sector’s portfolio, which totalled Sh254 billion during the period.
By comparison, the assets of unit trusts offered by banks in June 2019 stood at just Sh6.4 billion, or 9.7 percent of the total assets of Sh66.3 billion.
Only the CBA, Equity and Co-op Bank had unit trust businesses in June 2019.
The entry of more players into the asset class, including most recently Stanbic, has coincided with the popularity of unit trusts among Kenyans, largely due to the preservation of investments and the convenience of opting in or out.
Unit trusts invest primarily in fixed income assets, including commercial bank demand and time deposits and government securities.
About 1.2 million Kenyans were investors in unit trusts as at the end of June this year, a more than sixfold growth in the number of participants since March 2021.
Unit trust returns, which include money market, fixed income and balanced funds, reached double digits last year as domestic interest rates rose, adding to the appeal of pooled funds for retail investors.
The NCBA Unit Trust Scheme is the leading commercial bank investment scheme with an AUM of Sh33.1 billion and ranks third overall.
The entry of commercial banks into a space previously occupied by insurers such as CIC, Sanlam, Britam and ICEA has rattled the old guard.
Commercial banks are betting on their experience in conventional banking to capture a share of the ever-expanding collective investment scheme universe.
“We are known in the market for structuring complex products. Maybe we don’t have to be the fastest and don’t get a medal for it, but we get one for being more impactful.
“There are many asset managers today, but we would be different. We bring in trust, credibility, innovation and are interconnected globally,” Stanbic Bank Kenya chief executive officer Joshua Oigara noted at the launch of the bank’s unit trust last month.
The AUM of unit trusts reached Sh254 billion in June this year from Sh175.9 billion at the same time in 2023. mirroring steady growth for the asset class.
Insurer CIC leads the way with the largest unit trust scheme with assets of Sh66.8 billion, representing a 26.29 percent market share, while Sanlam sits in the second place with Sh29.6 billion assets.
As at 31 July, the CMA had approved 51 schemes comprising 224 funds.
