Stanlib Uganda, a fund management firm, has rolled out a unit trust targeting middle and low-income earners.

The product, officially referred to as a money market fund, allows investors to pool small savings and mobilise large-scale funds to generate high returns on investment in low-risk, fixed-income securities such as Treasury bills and bonds, fixed deposits and corporate bonds.

Financial experts say that the product bears a conservative investment model — an arrangement that favours more investment in fixed income assets than high risk, fluctuating income assets such as shares and currency trading portfolios.

As a result, most of the conservative unit trust funds invest more than 80 per cent of their assets in fixed income securities.

Key features of Stanlib Uganda’s money market fund include a monthly contribution of Ush100,000 ($27) from participating investors, a withdrawal turnaround time of four days, online application forms and access to members’ accounts, zero initial fees and annual management fees of two per cent of asset value. The fund offers an annual return on investment equivalent to the averaged 91-day Treasury bill yield plus a two per cent margin. The 91-day Treasury bill yield fell to 10.7 per cent last week. This means total return on investment likely to be earned from Stanlib’s money market fund would amount to 12.7 per cent.

The fund’s assets grew to Ush10 billion ($2.7 million) between August 2016 and February 2017 while its investor base increased to 250 people, according to company data.

Tax incentives
Income earned from investments made by unit trusts established in Uganda is exempted from withholding tax according to the Collective Investment Schemes Act of 2003. Unit trust funds are currently regulated by the Capital Markets Authority.
Besides the money market fund, Stanlib Uganda manages a retail umbrella pension fund targeting retail clients. This pension fund commenced operations in 2014 and has grown its client base to around 500 individuals.

“We have realised that people in the local market have different savings needs. There are people who prefer short term savings products and we believe a unit trust fund would take good care of consumers’ short and medium term savings preferences. But widespread distribution channels remain the biggest fundamental pillar of the unit trust business. For example, I went to a radio station the other day and someone called in and asked me how they could access this product. Through our sister company, Stanbic Bank, we intend to reach out to several retail clients scattered across Uganda at minimal cost,” said Annette Rumanyika-Mulira, managing director at Stanlib Uganda.

Low government spending and slow credit growth have left many Ugandan businesses and households struggling to make ends meet since last year.
There are only three active players in Uganda’s unit trust market — Stanlib Uganda, UAP Financial Services Uganda and ICEA Investment Services Ltd.

African Alliance Uganda, the pioneer unit trusts provider suspended its product in 2010 after six years of operation, citing low growth in assets and client numbers.

Prior to the suspension, African Alliance Uganda operated a money market fund and balanced market fund with total assets of Ush3 billion ($823,280) and a client base of roughly 1,000 investors.