The level of savings and investment in Uganda’s capital markets has grown significantly, notwithstanding the reduction of disposable incomes as a result of the prevailing inflationary pressures, the Capital Markets Authority (CMA) latest quarterly bulletin update indicates.
The report indicates that Collective Investment Scheme (CIS) Managers had a total of UGX 1.30 trillion in Assets Under Management (AUM) at the end of June 2022, representing a growth of 13.7% from UGX 1.15 trillion at the end of March 2022.
Analysis of CIS account types indicates that the largest growth was registered in the Umbrella Funds which constitute 70% of the total CIS Assets Under Management.
The Umbrella Funds are invested in interest-bearing securities such as treasury bills, treasury bonds, corporate bonds, and fixed deposits with approved financial institutions. Other popular CIS account types are namely; the Balanced Fund, Money Market Fund, Fixed Income Fund, and Equity Fund.
This growth in AUM can be attributed to increased awareness about the benefits of investing through CIS vehicles among local investors, investor confidence owing to a sound regulatory regime, decent returns on investments and intensification of business development efforts by the five licensed CIS operators.
Similarly, the total AUM for Fund Managers licensed by CMA closed the second quarter of 2022 at UGX 3.89 trillion, representing a growth of 0.7% from UGX 3.87 trillion at the end of March 2022.
Speaking about the growth in AUM, Keith Kalyegira, CEO of the CMA said: “Investing through a CIS makes the most sense during times like this when inflation is eating into the value of savings. With nominal returns on CIS funds currently averaging above 10% per annum, investors are able to preserve the purchasing power of their savings as the returns exceed the inflation rates.”
He added: “CIS’s offer a channel through which investors can earn a return on passive investments. CIS’s also ensure that Ugandans enjoy the benefits of having their savings managed by professionals. There are also the benefits of risk diversification, lower transaction costs, and access to a wide variety of securities investments with a small sum of at least UGX100,000. With a CIS, your securities can be sold when you deem it necessary, such as to pay school fees, in total or in part at any time.”
The licensed CIS managers are; UAP-Old Mutual Financial Services Limited, ICEA Lion Asset Management Limited, Britam Asset Managers Uganda Limited, Xeno Technologies Uganda Limited, and Sanlam Investments East Africa Limited.
Data from the Uganda Bureau of Statistics (UBOS) indicates that inflation as measured by the Consumer Price Index for Uganda for the 12 months to June 2022 increased to 6.8%, up from 6.3% registered in May 2022.