Capital Markets
Unit trusts cut fixed deposits to hoard cash in quarter to March
Friday August 04 2023
CMA director, Regulatory and Policy, Luke Ombara. FILE PHOTO | NMG
Money markets fund managers nearly doubled their asset allocation to cash and temporary deposits at the start of the year in a major portfolio reorganisation.
Data from the Capital Markets Authority shows the allocation by collective investment schemes (CISs) to cash and demand deposits rose by 94.76 percent in the quarter ended March to Sh10.8 billion from Sh5.5 billion in the preceding three months to December 2022.
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The shift to cash and temporary deposits is likely attributable to the fund managers opting to hold cash and near-cash assets to manage cash flows including withdrawals by customers.
In contrast, they cut their holdings of fixed deposits, unlisted securities, other CIS funds and off-shore investments by 6.4, 10.3, 16.6 and 17.1 percent respectively.
Fixed deposits shrank the most in absolute terms to Sh64.8 billion from Sh69.3 billion.
Meanwhile, the money market funds slowed down on their accumulation of government securities which grew by a marginal 3.41 percent to Sh75.9 billion.
Securities issued by the government nevertheless remain the largest investment class by the funds and represented 46.23 percent of their asset allocation, edging out fixed deposits which had a 39.47 percent share.
Cash and demand deposits represent 6.6 percent of CISs assets.
The schemes increased their allocations to listed securities in the period by 16.4 percent to Sh5.9 billion while investments in immovable property rose marginally by 1.38 percent to Sh518 million.
Listed securities and immovable property represent 3.58 and 0.32 percent of the funds asset allocation.
During the quarter under review, total assets under management increased by two percent to Sh164.28 billion from Sh161 billion at the end of December with four new entrants joining the market.
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The four were Mali Money Market Fund, Kuza Asset Managers, KCB Asset Managers and Etica Capital Limited and respectively held assets worth Sh877.4 million, Sh72 million, Sh56.3 million and Sh5.3 million.
The CMA has licensed 25 collective investment schemes as at the end of March.
The top money market funds by market share include CIC Unit Trust Scheme, NCBA Unit Trust Scheme, Sanlam Unit Trust Scheme, ICEA and British American Unit Trust Scheme.
