Are unit trusts for you?

There was a story in the story in the Standard about unit trusts this week.

At the beginning of the year, I considered stepping away from the NSE, cashing in my gains and putting the money in a unit trust. But a conversation with a custody manager put me off this path. He said that with the management fees at unit trusts were too high for individuals, implying that individual investors not see significant gains unless the trust had exceptional returns.

Certainly any investor familiar with the myriad Kenyan and African investment blogs and sites such as Cold Tusker, First Global Select, Kenya Capital Investments, Mwasjad, Nairobist, Outfoxed, Pesa Tu, Riba Capital, Stockskenya, Odeglenyang, Investing In Africa, Kenyan Entrepreneur, Hisagal, Gathinga – could be more informed as any unit trust investor.

Unit trusts

Approved Collective Investment Schemes in Kenya are:

1. African Alliance Kenya Unit Trust Scheme: Kenya Shilling Fund, Kenya Fixed Income Fund, Kenya Managed Fund
2. Old Mutual Unit Trust Scheme : Equity Fund, Money Market Fund, Balanced Fund
3. British American Unit Trust Scheme : Money Market Fund, Income Fund, Balanced Fund, Managed Retirement Fund, Equity Fund
4. Stanbic Unit Trust Scheme: Money Market Fund, Flexible Income Fund, Managed Prudential Fund
5. Commercial Bank of Africa Unit Trust Scheme: Money Market Fund, Equity Fund

12 thoughts on “Are unit trusts for you?

  1. MainaT

    Banks, I considered the same, but one of those you mentioned told me that they charge 5% initial charge and then 2% annual management. They had around 30% on their Equity Fund for 2006 if you adjust for the IPOs, which is lower than NSE i.e.not much to write home about.

  2. Hoseah

    Unit Trust may charge more than you are being charged by brokerage firms for your stocks, but these are professionally managed investments. These moneymanagers are legally acting in your best interest, they sole responsibility is to research and invest in the most lucrative counters in accordance to your investment objectives. If you have money, do not have time to follow highly dynamic counters, and would like your monies professionally managed; I do not think that too much to pay.

  3. Anonymous

    Banks, Where would you categorize the Zimele funds i thought they are also regulated by the CMA. So far their returns seem to be far much superior as compared to the rest

  4. DMX

    Finally you have brought Unit trusts into the loop. It is about time. I have invested money ther, in british American and have made about 33% returns in one year, I am not complaining!!

    I think that for a novice or a more cautious investor, this is the way to go. Growth is steady and perhaps more reassuring.

    The rest who are in for the bigger bang, then head for the regular market and wade your way through rumours, manipulations and dodgy stock brokers.

    basically its different strokes for different folks. All I would like to see are charts comparing the different unit trusts and their performance, that will be the best way to get a good deal and also the sense of competition will bring down the management fees. Right now I have no idea which unit trust performed better over the last 12 months.

  5. bankelele

    MainaT: Have talked to Old Mutual and BAAM people but am not hooked yet

    Hoseah: True. There are suitable for many busy people or passive investors who, as DMX says don’t want to deal with “rumours, manipulations and dodgy stock brokers.”

    Anonymous: Talked to Zimele, but never used the. Ajamaa had some say on Zimele last year

    DMX: Good for you. It is diificult to compare returns since it depends on when one invests. the only level playing field is the cost (investment fees charged)

  6. WM

    Hi Banks,
    Thanks for the good post. Tis true unit trusts do require som huge initial investment. They also offer minimal returns ( 7-10 %) which most people are not very contented with. There are options that can be pursued especially for group investments ( chama). Check out WM360 ( Could be an interesting prospect..

  7. Mashatall

    Can you write on Stockagents who have cropped up all over kenya lately? I see some of them plugging their companies on your blog, and some claim that they have better service than stockbrokers can give you.Are they regulated in any way? and what will happen to some of them when the bull market ends and liquidity looks for other investments with better returns?
    Unit trust in Kenya have been doing well due to the bull run that we had on the NSE, what kind of a return they give in a bearish market is what am interested in. We need market makers in Kenya to make the NSE more liquid, so that we can make money through going long or shorting of stocks, otherwise the situation as it is now is that you totally depend on prices appreciating.

  8. Hoseah

    I work for a Mutual Fund Company in the State (AXA), the great thing about mutual funds is the diversity of your portfolio, professional management, reduction of risk and less stress about managing your investments–and you can always change the funds/trust according to their concentration; meaning that you are not stuck in one fund/trust all the way through.

  9. Kudrinketh

    The U.S mutual funds are just a big fraud,they never beat the S&P index yet they charge so much fees.

    A better way to diversify is by using exchange traded funds(ETF) which offer diversification at a fraction of the costs of mutual funds.

    I maintain an account through Zimele and I’ve had nothing but good returns from them.I prefer a unit trust to the volatile NSE coz I can always convert to the money market portfolio at no cost when the market is headed south.

  10. njesh

    Hi Kudrinketh,

    I see that you’ve invested with Zimele… have always wanted to do so, but I can’t seem to find enough info about them, and how to go about it. I even tried to contact them and nothing! I live in Kansas city… so i can’t visit their office 🙁 Could you be so kind to educate me on that? my email is:

  11. ilanit

    How can you know what the latest investment advice is? If you do not
    have time to spend every day looking for the
    Los Angeles equity investment
    you should be investing in, consider hiring a full service stockbroker. These guys take a straight fee of what they make for you and they give good advice that you can take with you to the private bank.

  12. Anonymous

    I get a net salary of 18000,so i would like an advice on which is the cheapest bank & how much can i contribute monthly.

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