ADVOKS GLOBAL · KENYA
The Capital Markets (Collective Investments Schemes) Regulations, 2023
102. Composition of funds
Edition: 2023-12-15 · In force
102. Composition of funds
(1)In establishing the different funds, a scheme shall be guided by the following criteria on composition of the funds—(a)Money Market Fund: Invests only in interest-earning money market instruments which have a maximum weighted average tenor of eighteen months and includes credit rated or guaranteed commercial papers, Government securities, call deposits, certificate of deposit including fixed deposits in commercial banks and deposit taking institutions and any other like instruments as specified by the Central Bank of Kenya from time to time;(b)Equity Fund: The fund shall invest a minimum of sixty per cent of the market value of its asset under management in equities listed locally on a securities exchange, listed in other regulated exchanges or unlisted equities at all times. Any funds not invested in equities shall only be invested in cash and cash equivalents;(c)Fixed Income Fund: The fund shall invest a minimum of sixty per cent of the market value of its asset under management in fixed income securities at all times. Any funds not invested in fixed income instruments shall only be invested in cash and cash equivalents. Fixed-income securities refer to financial instruments with a fixed maturity and may or may not make periodic payments of interest and the principal is paid at maturity;(d)Balanced Fund: The fund shall invest in all eligible asset classes at all times provided that investments in money market, equities and fixed income instruments shall each have a maximum exposure of sixty per cent of the market value of assets under management; andProvided that—(i)investments in unlisted securities in East African Community partner states shall be up to a maximum of ten per cent of Assets Under Management;(ii)a fund may invest in a money market fund or another fund of similar constituent assets subject to a maximum limit of up to twenty per cent;(iii)investments in off-shore listed securities shall be a maximum of ten per cent of Assets under Management;(iv)investments in off-shore unlisted securities shall be a maximum of five per cent of Assets under Management;(v)other alternative investments to a maximum of ten per cent where applicable;(vi)the market value of an investment in an interest- bearing account, financial product or instrument of or issued by any single bank or financial institution or insurance company or a combination of any such investment in a single bank, financial institution or insurance company shall not in aggregate exceed twenty-five per cent of the Assets under Management;(vii)the market value of a collective investment scheme’s holding of securities relating to any single issuer shall not exceed twenty-five per cent of the collective investment scheme’s properties Assets under Management;(viii)investment in a related company shall be limited to ten per cent of the Assets under Management; and(ix)no assets under management in any of the funds provided in paragraphs (a), (b), (c) or (d) may be leveraged.(e)Special Funds-these shall be based on the fund managers’ investment strategy in the investment policy statement which shall be clearly described in the information memorandum to be approved by the Authority on a case- by-case basis subject to continuous disclosures to investors:Provided that—(i)the market value of an investment in an interest-bearing account, financial product or instrument of any single bank or financial institution or insurance company or a combination of any such investment in a single bank, financial institution or insurance company shall not in aggregate exceed twenty-five per cent of the assets under management;(ii)investment in alternative investments be at a maximum of eighty per cent;(iii)the portfolio may be leveraged to a ratio to be determined by the fund manager and such ratio and stop loss measures shall be disclosed in the information memorandum and the investment policy statement;(iv)investment in a related company shall be limited to twenty-five per cent of the Assets under Management; and(v)minimum investment of one hundred thousand shillings for each investor and maintenance of the same throughout the duration of the investment save for where the value may decline due to market fluctuations.(2)Notwithstanding subregulation (1), the assets under management may consist of cash and cash equivalents, where this may reasonably be regarded as necessary in order to enable—(a)redemption of participatory interests;(b)efficient management of the scheme in accordance with its objectives; or(c)other purposes which may reasonably be regarded as ancillary to the objectives of the scheme.(3)A scheme may only participate in an underwriting or accept placings if the same is—(a)disclosed in the formation documents; and(b)approved by the trustee.