Regional equities drive yields for local investors

Friday October 30 2020

Aerial photo of Kenya's capital city, Nairobi. PHOTO/AFP

By Timothy Kalyegira

Regional equity funds contributed the best yield for local investors due to the lifting of interest rate caps in Kenya, according to unit Xeno, a trust fund manager.  

In its results released during the annual general meeting recently, Xeno founder, Aeko Ongodia, said regional equity funds performed the best among its funds while domestic equities recorded the worst performance.

“Xeno Uganda regional equity fund was our best performing fund. It returned 39.1 per cent in 2019 compared to -7.5 per cent in 2018,” he said, noting the Kenyan market at the beginning of 2019 was tepid but picked up at the end of the year due to the lifting of interest rate caps for commercial banks.

Kenya in September 2018 set interest rate caps for commercial lending, limiting the interest banks could charge customers, a move that sent the financial industry spiralling. 

However, in November last year the law was repealed and according to Xeno, this led to positive performance of regional equities, which include banks and telecoms such as Safaricom, among others.

Xeno has over Shs8b in assets under management invested in regional equity markets, domestic equity markets, money markets and bonds for 978 unit holders by the end of 2019.


While the money market fund had an average yield of 11.7 per cent in 2019 compared to 9.3 per cent in 2018, the bond fund had an average yield of 15.8 per cent from 14 per cent in 2018.

Domestic equities recorded the worst performance with -13.2 per cent in 2019 from 15.6 per cent in 2018 on account of negative sentiment in the market that resulted in low trading on the Uganda securities Exchange.

“There was little trading in the domestic equity market, low demand and therefore prices dropped,” Ongodia said.

The low demand for trading of the shares of companies listed was despite the positive performance by companies on the stock exchange such as Stanbic Bank and Umeme, among others. 

USE has 17 listed companies nine of which are cross-listings from Kenya. 

The fund whose customer base is 10 per cent corporate entities and 90 per cent individual investors says 60 per cent of the money it receives from investors moves through mobile money.