Tom Magumba
30 September 2008
Ugandans with reasonable sums of money but which may not be sufficient for direct investment in the stock market now have an option of pooling money for investment through the newly introduced Insurance Company of East Africa unit trusts.
Insurance Company of East Africa (ICEA) last week announced the launch of a Money Market Fund, Growth Fund, and Equity Fund targeting individual investors as away of cushioning them against the risks of being directly involved in the stock market.
A unit trust is a form of investment where investors pool money for investment and benefit from economies of scale to diversify their investment portfolio. "We are targeting individuals who have money but lack where to invest and we shall put it in high yielding projects," Mr Gary Corbit, the managing director of ICEA said.
For investors with short-term interest, fund mangers usually invest in treasury bills and short-term bonds which are spread across securities without putting investors' money at risk.
On the other hand, investors with a long-term investment outlook can opt to participate in collective pools invested in long-term fixed income instruments such as bonds, shares with the prime objective being the stability of capital.
He said Investment Services Uganda Limited (ISU), a subsidiary of ICEA, which was launched last week, had been licensed by the Capital Markets Authority and would operate as a fund management company.
This brings to four the number of fund management companies that include Stanbic Investments, African Alliance, Alexander Forbes, and AIG Insurance. Mr Paul Sigsworth, the managing director of the Nairobi-based ICEA Asset Management Company said the Ugandan subsidiary would also handle funds for other companies that wish to invest with them.
"We chose here because want to tap into the opportunity of the financial market which is growing very fast," he said. ISU's entry into the market comes at a time when government is planning to liberalise the pensions sector and also planning a mandatory 5 per cent contributory scheme for all civil servants starting next year.
He said the past five years had seen an increase in the number of foreign, local banks and insurance firms. This and discovery of oil business means that the market portend a lot yet there were few service providers. He said the Kenyan company controls about KShs30 billion (Shs6.7 trillion) and wanted Ugandans to also benefit from this.
Mr Sisgsworth said if an investor had Shs100, 000, it would almost be worthless to invest in the stock market directly. If, however, he or she put it into a unit trust then the pool of money that accumulates can be invested in company shares by investment managers much more effectively.
He however said the risks associated with unit trusts still exist but the exposure is significantly reduced since funds are ploughed into a wide range of investment options, spreading the possible adverse reactions. However, Mr Hamis Mugendawala, ICEA's investment manager said the absence of a trustee bank may temporarily halt the progress.
But added that the company is negotiating with KCB Bank, the trustee of ICEA funds in Nairobi, to extrapolate its role to the Ugandan funds. KCB has already applied for a licence from CMA.
"After getting a trustee we shall then determine the minimum figure individuals can contribute to the pool," he said. The scheme will operate along side others services offered by the company such as buying bonds, advisory services on investment portfolios and pension management.
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