
Increased investment by Kenyans in dollar-denominated financial instruments is surprising to economic experts, particularly as the shilling strengthens.
The shift, analysts suggest, reflects lingering caution influenced by past experiences of currency volatility especially that experienced in 2023.
Recent data from industry players shows a surge in uptake of dollar-pegged assets, including foreign currency accounts, dollar bonds, and global mutual funds.
Head of Business Development at CIC Asset Management James Njagi says there has been a growing appetite for diversifying portfolios into more stable and globally recognized currencies, driven by a desire to shield savings and investments from potential future economic shocks.
“I think in March 2023, these dollar funds were about Sh6 billion across the industry, by September last year, they had grown about 200 plus per cent to about Sh36 billion,” said Njagi.
The preference for dollar-denominated assets is also attributed to their higher yield potential. Global investments offer returns that may outpace those of traditional local options, particularly in Kenya’s low-interest-rate environment.
“We have our dollar fund. This, again, is just a money market bank, but dollar denominated. So this fund is designed for investors who are again seeking for capital preservations and steady returns, but in US dollars. Now, the beauty about this fund is it protects your investment from volatility in terms of currency fluctuations,” said Njagi.
Despite an industry-wide dip in collective investment schemes last September, He says that the firm achieved a Sh10 billion increase in its fund size by December, reaching Sh80 billion.
Njagi attributed this growth to increasing investor awareness of higher-yielding options.
The growth was further pushed upward by the growing number of fund managers that got the authorisation by the Capital Markets Authority to operate in the country.
Late last year, CMA approved four new funds to offer diversified investments in different asset classes and geographical regions for investors.
The funds licensed by asset management firms seek to address investors’ diversified investment needs.
Britam Asset Managers Limited has been authorized to introduce the Britam USD Money Market Fund under the Britam Unit Trust Scheme.
The fund is targeted at the investor seeking stable, low-risk returns denominated in USD. It will invest its assets primarily in short-term money market instruments, including government securities and highly rated commercial papers, with the objective of preserving capital and realizing consistent income.
Additionally, Orient Asset Managers Limited got the approval to offer the Orient Dollar Money Market Fund under the Orient Umbrella Fund.
The Orient Dollar Money Market Fund It is designed to accommodate low entry levels and semi-annual income distribution for investors who seek reasonable stability in capital together with reasonable income.
The Authority also approved the new CIC Global Special Fund offered by CIC Asset Management Limited, which forms part of the CIC Unit Trust Scheme.
The fund targets investors falling within the medium- to high-risk category who seek a balanced approach as far as capital growth is concerned, with regular income actively managed through interest rate and credit risk.
The Shilling is currently trading at
129.56 units against the greenback,
having gained from a low of 160 early
last year.