Category Archives: Unit Trusts

Old Mutual Toboa

Old Mutual Loosens Up Part II (Corrected, thanks Joyce)

A few years ago Old Mutual unit trusts in Kenya had a minimum entry amount of Kshs. 500,000 ($7,462). Last September, they dropped this to Kshs. 200,000 and now they have gone even lower.

Old Mutual Kenya has launched the Toboa Investment Plan which costs just Kshs. 7,500 ($112) per month to start other funds in the family are money market and balanced fund. Speakers at the launch included Deputy Prime Minister Musalia Mudavadi, NSE CEO Chris Mwebesa, CMA CEO Stella Kilonzo, the new boss of Old Mutual Kenya, and Laura Chakava head of Old Mutual Assets in Kenya – who all spoke of the need for affordable collective investment schemes in the country

– Mudavadi said that while local government act mandated that the town councils should have savings and capital funds to cater for unexpected expenses, these are largely ignored – with only 40 of the 175 councils able to comfortably pay their salaries. Also high savings are a part of Vision 2030, but Kenyan savings rates which were already below the average of other African countries, were dropping
– Mwebesa lamented the 1.5 to 1.8 million CDS account holders in the country; the number is un-serviceable (mailing budget for statements of the CDSC costs almost $1m per year – and this compared unfavorably to account holder level in South Africa (100,000) and Brazil (500,000). He said more people should access the market through collective investment schemes such as unit trusts but whose entry levels had been high (elitist) until now
– Kilonzo and Mwebesa both alluded to a recent survey on investors (June 2008) that showed the level of investor education in teh country was not good. Most people relied on the media for share investment information, and were ignorant of the risks of investing in shares.
– Chakava said Kenyans have appetite for investment as shown in the IPO queues and pyramid schemes. OM now gives them an affordable, professionally managed vehicle for investment beyond the unpredictable buy low, sell high mantra that most investors try and follow.

Toboa will invest in fixed income, equities and off shore. OM, which pioneered unit trusts in Kenya, manages about Kshs. 10 billion, but CIS only control about 2% of the NSE. Other OM trusts have an initial fee of about 3 – 7% and annual fee of 2%, the Toboa will probably be slightly higher than this and will use Posta (post office) outlets to collect payments.

Edit: Interesting discussion on Old Mutual investment plans from the Stockskenya forum

Old Mutual, Credit Reference, Insular TZ

Old mutual loosens up: Old Mutual , the pioneer of unit trusts in Kenya has made some radical changes to it contractual savings plans to cope with a changing market place with many unit trust choices from a competitive fund and insurance industry. Changes include;
– Plans will no longer lapse if premium payments are stopped. E.g. when people get retrenched
– Savings (in a lapsed plan) will remain invested until maturity or can be paid out early
– If your saving plan was terminated without a payout, consider it reinstated!

Credit reference rules: Former finance minister Amos Kimunya was able to gazette the rules for operations of credit reference bureaus in Kenya before he left office. Provisions include;
– Bureaus will be licensed by the central bank
– Signup costs are 100,000 shillings ($1,500), a bank guarantee for 1 million and another fee of 100,000 per year
– Bureaus may share info only with a customers’ permission (which happens when you sign for a loan)
– They may only share information for business decision making (evaluate credit prospects)
– Bureaus must keep track of all information they share
– Customers are entitled to one free report a year, and within 30 days of a negative referral
if a customer complains, and bureau not able to complete an investigation of disputed information within a month, information will be deleted as request by customer

Undugu at work: More Tanzanian IPO news with the upcoming sale of 21% of the Tanzanian Government shares of the National Microfinance Bank (NMB) to raise 63 billion shillings ($54 million) and later to be listed on the Dar es Salaam Stock Exchange. But the offer is open to to individual Tanzanians and companies that are whole owned by Tanzanians – unlike Stanbic (Ug) and Safaricom (Ke) (which Tanzanians were also barred from subscribing to)

Issues for Diaspora Investors

Unit trusts
In all the political news this week, some may have missed this story on collective investment schemes (funds, unit trust), who will now have to get more aggressive (take on more risk) to deliver commensurate returns – and are now asking the regulator (CMA) to relax some of the rules that restrict their investments.

A year ago this post discussed unit trusts and the cost of investment being a major deterrent to the returns they offer (and at the time the NSE was in a much better position). I still have issues with the 3 – 5% initial fee and 2% annual fee charged by many unit trusts.

Real estate
The post-election violence will have a mostly negative impact on property values and in rural Kenya, and in towns like Eldoret, Kisumu, Nakuru and especially in Mombasa (where the real estate boom was driven by visitors/tourism numbers). The cost of building will also go up as demand for supplies will be great. So buy cement company shares (Bamburi, ARM, Portland) the day Kofi Annan succeeds in his mediation efforts

In Nairobi, properties near slums like Ayany (adjacent to Kibera) have been badly affected owners and/or tenants moving out. However there is also increased demand in some of the same areas – perceived to be safer parts of the city, such as Kileleshwa and Westlands. They will also benefit from residents of other towns like Kisumu relocating to Nairobi.

These are also the areas that many Diaspora Kenyans have invested in or are considering investing; and while many have postponed their real estate investment decisions, those already in (with mortgages to pay) will have to wait out the storm. Also it may be wise to set up several investment companies to keep rental turnover and sidestep new tax laws

Also Kasarani which is one place you can still buy land cheaply to build, will have values of land increasing as will parts of Central Kenya.

Taxes, IPO’s and Unit Trusts

Taxing corruption
So Parliamentdealt another blow to the war on corruption by denying the Kenya Anti-Corruption Commission with the authority to investigate crimes that happened before it was formed (2003).

KACC as a body has aimed high (going after high profile figures – CEO’s, Ministers) but mostly caught small fry leaving many Kenyans dissatisfied and who now consider the Commission to be a waste of money

But there’s another public institution – the Kenya Revenue Authority (KRA) that has achieved milestones in the war of corruption that KACC can only dream of. They have gone after untouchables, and some lawyers and MP’s have had their accounts and salaries frozen and asset seized. Now if only they could publicize this.

RICO in Kenya?

Why not legislate a tax on corruption, so if you’re named, you could lose 90% of property, leaving the accused with 10%? This is humane, but is as good as taking back everything – and bypassing court processes. Hitting Pattni with a tax bill would end 10 years of court injunction and delays and realize some significant gains in cash recovered.

Kenye Re slipping away
My strategy to bypass the IPO of Kenya Re not working as well as I thought. I placed orders at 13 shillings, only for the share to zoom. It’s tempting to buy the shares at 17 or 18 and then the balance when they drop (if ever).

Unit Trust get more accessible
Market leader, Old Mutual, has lowered their minimum entry amount for unit trusts from Kshs.500,000 to Kshs. 200,000 (about $3,000). The offer runs till December 2007.

Drummond Investment Bank

Yes, the beleaguered stockbroker Francis Drummond is now Drummond Investment Bank as per the latest licensee list from the equally occupied Capital Markets Authority.

Other Notes
– Zimele has two new unit trusts – a balanced and a money market fund
– Suspended Francis Thuo is now missing from the list of stockbrokers, but so is Faida Securities. Is that an omission?
– Uchumi advisers Royal – who later became Amana, are missing as are B A fin. Mgmt and Interglobal who have officially been deregistered. Meanwhile Inter Alliance International are new investment adviser
– Equity Bank now joins the list of authorized depositories

Safaricom Valuation?
The government has valued the 9% of Safaricom shares pledged to banks who advanced a bridging finance loan to restructure Telkom Kenya at 5.835 billion – placing the whole company’s valuation at about 64.83 billion shillings ($926) million and second to EABL at about $1.4 billion)

Edit: Allowing for banks discounting the shares at 60 – 70% of nominal value, puts the value of the company at between 92 and 108 billion shillings.