Special Funds is the new buzzword that is currently doing the rounds in Kenya’s investment circles as Investment Banks and Fund Managers battle to catch the attention of the investing public with high-octane launches of these funds.
The list of asset managers that have set up special funds that give investors access to local and well as dollar-denominated global assets, is getting longer by the day. A growing number of stockbrokerage firms are also seeking regulatory approvals, to upgrade their licenses so as to offer these special funds.
Special Funds that are Dollar-denominated
Britam is the latest entrant with its recent launch of the Kenya Shilling denominated Britam Multi-Asset Special Fund and the US$ Britam Enhanced Global Equities Special Fund.
Special Funds are a category of collective investment schemes designed to give investors access to more specialised strategies or asset classes.
According to financial analysts, the boom in Special Funds reflects a growing demand for diversification beyond traditional Kenyan equities, government securities and money-market funds.
Special Funds Market: Who are the Big Players in this League
Competition in Kenya’s investment ecosystem is getting intense as more Special Funds enter the market.
A number of stockbrokerage firms and fund managers are also speeding up to upgrade their licenses, ostensibly to expand the range of products that they can avail to investors.
Among firms making their debut in this space include Absa Bank Asset Managers- who have gotten the nod from regulators to launch its two Multi Asset Special Funds, one in US$ and the other denominated in Kenya Shillings.
Also included is Zimele Asset Managers who now have a US$ denominated Money Market Fund, US$ Fixed Income Fund and a Green Investment Fund LLP- which targets small and growing green businesses across Kenya and the East African region.
Kestrel Capital has, meanwhile, upgraded its permit from a Stockbroker to Broker-Dealer. Hass Crest Capital now has a Fund Manager licence while Livonna Advisory Partners has received an Investment Adviser licence. Further, Liaison Wealth has received a Corporate Trustee licence.
How Special Funds will Reset the Investment Landscape
Analysts say these Special Funds are likely to gradually reshape the competitive dynamics of Kenya’s capital markets.
New fund will need to deploy more to match additional demand for listed equities, fixed income and other investable securities. The presence of more institutional participants will also increase trading volumes and improve price discovery. This is especially so in liquid counters.
As more fund managers compete for attractive investments, fundamentally strong and liquid Nairobi Securities Exchange(NSE) counters will catch investor interest, and make the investment climate more attractive.
With more Special Funds, Managers with different mandates, liquidity needs and risk appetites will engage more on portfolio rebalancing, tactical allocations and profit-taking. This will lift the level trading activity as well as short-term stock price movements.
More Special Funds mean investors now have more choices across Kenya Shilling and US$ denominated money-market, fixed-income, multi-asset, global-equity and thematic/green strategies.
Fund Managers will now have to compete on performance, fees, risk management, transparency and investor experience and not simply on brand recognition.
What this means for the investment ecosystem
Kenya is expanding options available to investors as managers, products, capital pools, competition for assets and market participation, increases
At the NSE, availability of more Funds will improve its liquidity, institutional participation and price discovery, while potentially introducing greater short-term volatility as new pools of capital enter and existing managers reposition.
For investors, these Special Funds offer an opportunity to identify quality businesses that have attractive valuations and sustainable earnings.
More money entering the market can lift the tide — but valuation will determines which boats are worth boarding.
