Why Fund managers seek expansion to retail market

Lewis Njoka @LewisNjoka

Reduced cost of serving investors digitally and the desire to diversify risks are some of the key factors that have led fund managers to renew efforts in attracting retail investors, analysts have said. 

Recently, Kenya’s investment sector has witnessed a renewed effort to rope in retail investors with a number of fund managers launching products targeting the segment. 

Traditionally, most fund managers target institutional investors and high net worth individuals largely ignoring retail investors.

Yesterday Absa Group launched its new subsidiary, Absa Asset Management Ltd, whose products will focus on three key customers segments namely institutional investors, retail investors and high net worth individuals.

According to Anthony Mwithiga, the Chief Executive Officer of the new Absa subsidiary, the fund manager will offer investment products going for as low as Sh1,000 targetting the retail market segment.

The subsidiary, which took Absa about 18 months to develop and launch, is part of the company’s deliberate diversification efforts.

“We are now well placed to compete shoulder to shoulder with other colleagues who have been in the asset management business for a while now,” said Mwithiga.

In January, ICEA Lion Asset Management Ltd launched a unit trust digital portal dubbed Digitrust which targets retail investors and allows them to invest as low as Sh500.

Other products in the market targetting retail investors include Genghis Capital Unit Trust Fund and Cytonn’s Money Market Fund.

While fund managers have always had unit trusts targetting retail investors, the sector has in the recent past witnessed renewed effort to onboard investors from this segment.

Bigger strategy

Churchill Ogutu, an analyst at Genghis Capital said the move is part of a bigger strategy by asset managers to diversify their product pool. 

Additionally, fund managers are seeking to take advantage of the precautionary saving brought about by the Covid-19 pandemic, he said.

“Primarily, they have been looking at institutional clients. So it is an aggressive strategy of now getting into the retail market. They do have these retail products but I think it’s about time go aggressively into the retail market,” he said.Ogutu said the renewed effort is an indication that asset managers have noticed opportunities in the retail market considering that they have always had unit trusts.He, however, noted that the move should not be interpreted to mean that fund managers were shifting away from institutional investors who are their main source of patient money.

According to Elizabeth Nkukuu, the Chief Investment Officer at Cytonn, the recent efforts seek to bring in young, digital savvy investors who may not have much cash to invest.

To do so, however, fund managers have been forced to address the challenge of poorly structured market which had resulted in low number of retail investors over the years. 

“Initially, most of the minimum investments were really high, as high as Sh100,000. But the digital investor is young and cannot afford these huge amounts to save. They would want to participate in investment, but the amount of money they have is low,” Nkukuu said