S7:E6 | What Are Collective Investment Schemes In Kenya? | Rina Hicks |

Whether you have questions or are ready to start investing, our team is here to help.
E-mail: [e-mail]
WhatsApp: [phone]
Call: ([phone]
oak.africa/
Head Office
Address: Crawford Business Park,
State House Rd, Nairobi Kenya.
OAK Special Fund is a Leveraged Asset Allocation Fund domiciled in Kenya. It offers investors a unique opportunity to access both local and global markets. The fund is managed by Faida Investment Bank and is licensed by the Capital Markets Authority as a Special Collective Investment Scheme (CIS).
Key Information
Inception Date: February 2024
Base Currency: Kenya Shilling (KES)
Minimum Investment: KES 1,000,000
Minimum Top-up: KES 100,000
Lock-in Period: 6 months
Fund Manager: Faida Investment Bank
--------------------------------------
What is a Collective Investment Scheme (CIS)?
A Collective Investment Scheme (CIS) is essentially a pool of money collected from various investors-ranging from individual retail investors to large institutions like pension funds, insurance companies, and corporations. This pooled money is then invested in a range of assets such as stocks, bonds, real estate, or other financial instruments. The collective nature of the scheme allows individual investors to benefit from diversification, professional management, and economies of scale.
In simpler terms, a CIS allows people to contribute their money to a fund that is professionally managed on their behalf. A CIS can have different types of funds, each focused on particular asset classes, such as:
Money Market Funds: These invest in short-term, low-risk financial instruments like deposits with banks and commercial paper.
Fixed Income Funds: These invest in fixed income securities like government and corporate bonds, including local and foreign bonds.
Equity Funds: These funds invest in shares of publicly traded companies.
Balanced Funds: These combine different asset classes, typically balancing between stocks, bonds, and other assets.
By pooling money, investors can access a wider range of investments than they would individually, spreading risk and potentially achieving better returns.
What is a Fund?
Rina explains that a fund is essentially a structured pool of capital, similar to a group saving club (Chama), where individuals or institutions put money together and invest it collectively. The pooled money is invested according to a predetermined strategy, and any gains or losses are shared proportionately among the investors based on their contribution to the fund.
The Role of Regulation and Safeguards in CIS
Rina emphasizes that regulation is critical in ensuring the integrity and security of Collective Investment Schemes. In Kenya, to offer a CIS, the fund manager must be licensed by the Capital Markets Authority (CMA). The proposed fund must also be approved by the CMA, meaning that every detail-from the strategy to the type of assets to be invested in-is reviewed to ensure it aligns with regulations and is transparent to investors.
There are specific guidelines for different types of funds (money market, fixed income, equity, balanced funds), but there are also special funds, which have more flexibility but must still operate within the rules established by the CMA.
The Importance of Custodians and Trustees
One of the key safeguards for investors in a CIS is the involvement of third parties like custodians and trustees, whose roles are vital to the integrity of the fund.
Custodian: The custodian is usually a commercial bank that holds the assets of the fund. For instance, if an investor invests in a CIS managed by Faida Investment Bank, the money is held by a custodian (such as KCB). This ensures that the fund manager does not physically hold the assets, reducing the risk of misuse. The custodian follows instructions from the fund manager on how and where to invest the pooled funds.
Trustee: The trustee is an independent party responsible for overseeing the fund’s operations and ensuring the fund manager is adhering to the rules. The trustee checks that the fund manager is following the investment guidelines set forth in the fund’s strategy and that the assets are being invested as promised. The trustee has direct access to the custodian and monitors the fund to ensure investor protection. They also provide regular reports, typically on a quarterly basis, ensuring everything is operating smoothly.
These checks and balances are crucial because they ensure that investors' money is safeguarded and that the fund manager is following legal and ethical guidelines.
The Process for an Investor
If you, as an investor, decide to put money into a CIS, the process is straightforward:
KYC (Know Your Customer): The investment company will conduct due diligence to ensure that your money is coming from legitimate sources (to prevent money laundering or financing terrorism). This is required by anti-money laundering regulations.