Iterambere Fund grows by 38% to Rwf1.45bn in 2017

Many Rwandans were not familiar with unit trusts as investment vehicles about two years ago. This was, however, to change when government mooted the RNIT Iterambere Fund whose initial public offering (IPO) was in mid-July to October 7, 2016, marking the beginning of the unit trust industry in the country.
Source: RNIT.
Source: RNIT.

Many Rwandans were not familiar with unit trusts as investment vehicles about two years ago. This was, however, to change when government mooted the RNIT Iterambere Fund whose initial public offering (IPO) was in mid-July to October 7, 2016, marking the beginning of the unit trust industry in the country.

The fund, one of the many government initiatives aimed at boosting national savings to 20 per cent of GDP by 2020, is so far doing well, a report by Rwanda National Investment Trust (RNIT), the fund managers, indicates.

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RNIT chief Gashugi.

According to the annual report, the Fund’s net asset value (NAV) rose by 11.10 per cent to Rwf112.02 as at December 29, 2017, up from Rwf100.92 in November 2016. This signifies an absolute return of 12.02 per cent since inception, RNIT chief executive Andre Gashugi says. The value of asset under management has grown by 37.9 per cent to Rwf1.459 billion over the reporting period, up from Rwf1.058 billion a year ago. The Fund has expanded both in terms of returns, as well as size, with returns up 9.88 per cent on an annual basis (October 2016 to October 2017).

Gashugi attributes the growth of the fund to ongoing campaigns encouraging Rwandans to save and invest in various investment vehicles, including Iterambere Fund, Treasury bonds and shares of firms listed on the RSE.

“Considering the returns of comparable liquid products, like treasury bills, bank deposits and Rwanda Stock Exchange (RSE) index performance, Iterambere Fund is the best liquid product in the country,” the official notes.

Embracing a savings culture

He notes that interactions between RNIT and different stakeholders, including local governments, institutions and employers, indicate that people are slowly starting to understand the importance of long-term savings.

“With concerted efforts and collaboration between government agencies, as well as the private sector, Rwanda will have a ‘commendable’ savings to GDP ratio. In turn, investments will flow into the Fund due to consistent returns,” Gashugi argues.

More investment vehicles needed

Gashugi says that, for the capital markets to grow and prosper, it is important that more buy-side institutions, like unit trusts, hedge funds and mutual funds, are encouraged so that the interest rates do not get polarised due to absence of supply.

“Similarly, unit trusts being long-term players help in increasing liquidity on the stock market as they frequently trade at the bourse,” he adds. The official reveals that plans are underway to launch more funds “both at institutional level and retail level”.

Understanding how unit trusts or mutual funds work

A unit trust or a mutual fund is a pool of money contributed by many investors and, collectively, managed by an asset management company. The key benefits are power of collective negotiation and professional management service.

Investments by the Fund are made in accordance with investment objectives as stated in its constitutive documents like the offer document and trust deed.

This kind of investment vehicle allows small investors to participate in the securities market, thereby providing a platform to this market segment, which does not normally access the market due to high threshold limits of minimum amount to be invested. Once one buys into the Fund and allotted units for the amount subscribed, they become part owners of its assets.

The Fund’s returns (net of expenses) are fully passed on to the investors. The expenses of the fund are also defined and have a maximum limit as stated in the offering document.

Challenges

There are two key challenges: the low level of financial literacy and, secondly, even those who are financially literate, the propensity is more towards consumption than savings. Moreover, unit trust products, though popular all over the world, are experiential products.

“So, it is important that people should start even with a small sum and experience the benefits. This is the reason why the minimum amount required for one to invest in Iterambere is as low as Rwf2,000,” Gashugi says. He, however, says some people still prefer to hold cash.

“The currency in circulation as on October 2017 is Rwf139.8 billion, meaning that some people still prefer to hold cash. If say 10 per cent of this is saved and invested in the Fund, the size of the Fund can grow by about Rwf14 billion,” he says. This would serve as a huge trigger for domestic institutions to grow and flourish, as well as contribute to national development, according to Gashugi.

Takeaways for Rwandans for the New Year

Progress and development is directly dependent on the level of investments. Development achieved through foreign investments is vulnerable to global shocks.

“Therefore, a strong domestic savings culture can greatly help in absorbing these shocks and forge ahead with minimal impact on the economy. That’s one of the reasons why Rwandans need to save today and invest so that they can see a better tomorrow,” the fund manager say.

However, it is important for Rwandans to examine their consumption habits and generate savings for investing in the Fund or any other investment vehicle, Gashugi adds.

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