Amana Capital Limited has been granted a 28-day grace period by the Capital Markets Authority to enable the asset manager get its affairs in order.
“The moratorium (freeze on redemptions) will give ACL time to realise strategies to improve its liquidity position to meet redemptions,” CMA said in a statement.
CMA said this would help the unit trust improve its cash flow position to meet redemption obligations to unitholders with investments in the Amana Shilling Fund.
The freeze will affect all unitholders meaning they will not be able to redeem cash until the 28 days are over.
The investment firm has recently come under fire for refraining its clients from withdrawing their funds, with a chunk of cash lost after Nakumatt’s collapse.
Amana Capital had invested Sh275 million in commercial paper, up to 20 per cent of its assets in Nakumatt Holdings.
The firm is among a group of investors that provided Nakumatt with Sh4 billion in 2016 when they purchased the retailer’s commercial paper.
Commercial papers are short-term loans offered by private entities at an interest rate higher than commercial banks and Treasury bills. These debt facilities are unsecured and often offer little financial disclosures.
CMA said it has been engaging the Board and Management of Amana as well as the Trustee and the Custodian to come up with solutions to the firm’s liquidity challenges.
Amana’s shilling fund has remained frozen over the last two years. This has frustrated clients who had been accustomed to recalling their capital in a matter of days when entering similar investment vehicles.
In 2018 Amana Capital had considered either shareholders’ capital injection or taking legal action as the only two viable options to recover the lost funds.
CMA said it has convened an extraordinary general meeting of the unitholders of the Amana Shilling Fund during the moratorium period, as required under the Trust Deed and Rules of the Amana Unit Trusts.
Unit trusts, which make investment decisions with the approval of their trustees only disclose publicly the broad investment classes rather than the specific instruments.
This has seen the loss of investor funds in the billions, taken down by collapsed firms such as Nakumatt, Athi River Mining, Chase and Imperial Banks.
Data by CAM shows unit trusts held a cumulative Sh71.4 billion in assets under management by the end of September 2019, 92.4 per cent of which were held in government securities, cash deposits, and listed equities.
