What are Unit Trust Funds
Unit trust funds are the solution for an investor seeking broad diversification – without necessarily having prohibitive sums of money. We can simplify unit trusts as; a pool of funds or a collective investment vehicle where:
✤ Different individuals or entities pool together funds into this vehicle
✤ Each individual or entity purchases units in a fund of their choice
✤The vehicle is operated by a professional Fund/ Asset Manager
✤The Fund/ Asset Manager chooses how to invest the pooled monies
✤The funds are commonly invested in; government and corporate bonds and treasury bills, commercial papers, cash and bank deposits, shares (equities), off-shore, etc.
✤The Fund/ Asset Manager charges a management fee for investing on your behalf
✤Funds grow through; capital appreciation, interest and dividends incomes
Types of Unit Trust Funds
Governance of Unit Trust Funds in Kenya
All unit trust funds in Kenya are governed and regulated by the Capital Markets Authority.
The regulatory framework provides all unit trust funds have the following:
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- Fund Manager – invests the collective pool of funds according to the investment fund’s investment objectives
- Trustee – ensures investors interested are adequately protected
- Custodian – the approved banker of the trusts, ensures the safety of the funds
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How to Invest in Unit Trust Funds
The starting point is your financial goals. What do you want, when do you want it and for what purpose?
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- Your goals should always come first (investment horizon {tenure} and end-goal amount)
- Your risk appetite or risk tolerance is also a factor
- Liquidity requirements (in case of an emergency)
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How to go about it
You purchase unit trust funds through the asset managers or their distribution networks. You can contact me for a review and more information.
The make-up:
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- Minimum account opening amount and minimum top-up amount
- Units are allocated based on the purchase price set by the fund manager.
- You can top up at your pace subject to the minimum amount – however, there’s no top limit
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Benefits of Unit Trust Funds
- Diversification – This is an ideal choice for someone who considers themselves small and would want to invest in: stocks, government and corporate bonds, fixed income securities, offshore counters and property. These are options that individual investors may find impossible to reach.
- Regulated professional management – the schemes are regulated by the Capital Markets Authority – keeps providers under keen watch. The fund managers are specialists in this field, meaning they research well before deciding where to place the money.
- Compounded growth – depending on your investment horizon, you stand to grow your fund over time through payment of dividends and interest. However, your goal and investment horizon and choice of fund dictate how much you stand to gain or lose. Refer to types of funds for a clearer picture.
- Easy to liquidate – turning your investment back to cash is easy. Yours is to give a withdrawal notice; the funds are released back to your bank or mobile wallet within a reasonable time frame. Some fund managers pay you in as little as within 12hrs. This benefit is ideal for persons considering building an emergency fund. Also, interest earned via money market funds is much better than bank savings and some fixed deposit accounts. You can also try The 52 Weeks Saving Challenge
Disclaimer
This article is for awareness purposes – it should not be mistaken for advice. For detailed information, seek financial advice before purchasing any unit trust. For direct contact and advice, use the WhatsApp chat option.
