The Independent Uganda: You get the Truth we Pay the Price
The industry still grapples with limited awareness, inadequate skilled labour
Kampala, Uganda | ISAAC KHISA | Assets held in Collective Investment Schemes (CIS) that includes savings and credit cooperative societies, local individuals, investment clubs, institutional investors and local companies in Uganda, has increased sharply over the last six years amidst limited awareness and inadequate skilled labour.
CIS’ refers to investment products that gives investors opportunity to pool savings with those of other investors, thereby creating a large pool of funds to be invested on their behalf by professional managers.
Though CIS are structured either as unit trust schemes or investment companies with variable capital, all CIS in Uganda are structured as unit trust schemes that are managed by Unit Trust Managers such as UAP old Mutual Financial Services, XENO Investment Management and Britam Asset Management Company.
Latest data from the industry regulator, Capital Markets Authority, shows that the assets under management by the CIS increased from Shs1.56bn as at the end of December 2013 to Shs 173.5bn as at the end of June 2019.This represents merely 0.16 per cent of the Uganda’s Gross Domestic Products.
Notwithstanding the growth recorded over the last years, the size of Uganda’s CIS industry remains small compared to CIS industries in other countries across the continent.
In Africa, South Africa has the largest CIS industry with assets under management of Shs 668.32trillion (US$181.7bn) while in East African Region, Kenya leads with assets under management worth Shs 2.22trillion ($603.96million).
Shs157billion assets
The total assets held under management of Unit Trust Managers stood at Shs157bn as at the end of May this year. UAP had the largest market share with a total of Shs119.4bn. This represented 75.8 per cent of the total assets under management.
Stanlib had Shs21bn, representing 13.3% market share, while ICEA and XENO had Shs12bn and Shs5.2bn respectively.
In terms of the number of investor accounts held by Unit Trust Managers, there were 5,037 investor accounts in the CIS industry, with 90% held by local individuals.
UAP again had the biggest market share in terms of total accounts held with 2,232 accounts, representing 44.3% of the total accounts held by Unit Trust Managers.
This development comes at the time Unit Trust Management firms are paying an average of about 11-12% per cent interest on the customer’s savings annually, according to Simon Tumwebaze, a manager at UAP Old Mutual Financial Services.
It also coincides with Stanlib’s announcement recently of its planned exit from the Ugandan market. The firms has announced transfer of the customer’s assets to the ICEA Asset Management Uganda.
Most of the assets under management are spread in the money market fund, balanced fund, umbrella fund and the equity fund.
Dickson Ssembuya, the Director for Research and Market Development at the CMA said the record growth in the value of CIS over the last six year amidst lack of financial literacy among the population presents a new investment venture for prospective investors.
“Majority of the Unit Trust managers surveyed rely on their in-house sales teams to attract new clients, even though some Unit Trust managers also use other distribution channels such as third party independent financial advisors and parent company third party sales agents,” he said.
“The heavy reliance on the in-house sales teams limits the reach of Unit Trust Managers, while third party distribution agents such as investment advisory firms, brokerage firms and banks are under-utilized.”
He said the industry also faces human resource related challenges such as high staff turnover because of competition from industry players, limited knowledge on the CIS products and miss-selling of CIS products by the sales agents, especially in regards to inflating expected returns to clients.
However, Esther Nakangu, a financial manager at the XENO Investment Management firm said the issue of service distribution is now being resolved with the evolution of the information and communication technology.
Currently, it is only XENO that carries out its transactions online including determining the amount of money to invest and the projected returns.
Going forward, Ssembuya said there is need to promote investor education and public awareness as was the case with India and Namibia to attract more clients.
“The Uganda Securities Exchange also (need) to distribute market data for free as opposed to selling it to the market players as well as carryout countrywide financial education campaigns,” he said.
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