When collective investment schemes gained traction in Uganda in 2024

A typical Ugandan considers buying land and building a house to be the biggest and most reliable form of investment.

However, this trend is steadily changing, with more Ugandans diversifying by embracing Collective Investment Schemes (CIS) or Unit Trusts.

A unit trust, also known as a collective investment scheme or a mutual fund is a professionally managed investment fund in which investors’ contributions are pooled together to purchase financial securities, such as equities (shares), bonds, bank deposits etc. In Uganda, unit trust funds are regulated by the Capital Markets Authority (CMA).

According to the Financial Services and Markets Act 2000, a collective investment scheme is any arrangement concerning property of any description, including money, the purpose or effect of which is to enable persons taking part in the arrangements to participate in or receive profits or income arising from the acquisition, holding, management or disposal of the property or sums paid out of such profits or income.

This trend gained more traction in 2024, with more Ugandans investing in CISs.

For instance, fund assets under management (AUM) in Uganda are now worth 3.5 trillion shillings or about $945.4 Million, the second highest in East Africa. This is according to the first (July to September) quarterly report by the Capital Markets Authority (CMA).

There is also a marked growth in the number of people investing through the CIS, from 92,165 at the end of June 2024 to 103,950 in September 2024, an increase of 12.8 percent.

Kenya leads with CIS Managers there holding Assets Under Management (AUM) worth 1,966.4 million Dollars), while Tanzania comes third with 875.9 million dollars.

This rise in AUM and account numbers is largely attributed to increased investor awareness of CIS benefits, midterm access to National Social Security Fund savings, some of which have been invested, and robust regulatory protections that enhance investor confidence.

Josephine Okui Ossiya, the Chief Executive Officer at Capital Markets Authority, says more and more of the Ugandans are recognizing the benefits of investing through pooled savings vehicles.

“The regulatory framework has instilled confidence among investors, who are assured of the protection afforded by investing in regulated financial products, such as CIS,’’ she says.

Keith Kalyegira, the chief executive officer of the CMA, says: “Investing through a collective investment scheme makes the most sense during times like this when inflation is eating into the value of savings. With nominal returns on funds in collective investment schemes (CISs) currently averaging above 10 per cent per annum, investors can preserve the purchasing power of their savings as the returns exceed the inflation rates.”

Kalyegira adds: “CISs offer a channel through which investors can earn a return on passive investments. CISs 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 Shs 100,000.”