Capital Markets Products
Investment Opportunities Available in the Kenyan Capital Markets.
Information on Financial Instruments (Products)
This has been the oldest financial instrument in the Kenyan Market. It is a sign of ownership in a company and carries limited liability. Potential investors can invest in this product through an Initial Public Offer (IPO), a Rights Issue or through the Nairobi Stock Exchange.
Presently, Kenya has equity valued at over Kshs 1 trillion (USD 13.15b) from 55 companies available for trading at the Nairobi Stock Exchange
These are debt instruments issued by the Government of Kenya to finance budgetary goals and were introduced in the Secondary Market over 10 years ago. They are available in both the primary market (through auctions) and the secondary market (through the NSE). An investor needs at least Kshs. 50,000 to purchase bonds in Kenya.
These are long-term (at least one year and above) debt instruments issued by the private sector .
Issuers of this instrument targets high net worth investors who understand technical information about pricing, valuation, yields etc. This implies that this product is not completely open to every individual or institutional investor. Like Treasury Bonds, an investor needs at least Kshs 50,000 to purchase this product.
Loan Stocks & Preference Shares
These are less frequently used Financial Instruments in the Kenyan Market and qualify both as equity and debt. Despite priority in payment from the balance sheet of loan stockholders over equity holders, yields on these fixed income securities are relatively low.
Collective Investment Schemes
Collective investment schemes are pools of funds that are managed on behalf of investors by a professional fund manager.
They are arrangements made or offered by any company under which the contributions, or payments made by the investors, are pooled and utilized with a view to receive profits, income, produce or property, and is managed on behalf of investors according to specific investment objectives that have been established for the scheme.
In return for putting money into these funds, the investor receives shares or units that represent his/her pro-rata share of the pool of fund assets.
There are many kinds of CIS in Kenya with the main ones being:
1. Unit Trusts;
2. Investment Clubs;
3. Mutual Funds; and
4. Employer Share Ownership Plans (ESOPS)
Venture Capital Funds
Venture capital is capital invested in a project where there is a substantial element of risk, especially money in a new venture or an expanding business in exchange for shares in the business.
It is not a loan. Venture capital Funds are emerging as critical in addressing the funding needs of entrepreneurial companies that generally do not have the size, assets, and operating histories necessary to obtain capital from more traditional sources, such as public markets and banks.
There is currently one authorized venture capital funds in Kenya registered by the Capital Markets Authority (Kenya) i.e. Areous Fund,
Asset Backed Securities
Asset-backed securities constitute a growing segment of the global capital markets. In recent years the ABS market has enabled companies and banks to finance a wide range of assets in the public debt market and has attracted a variety of fixed-income investors.
Asset-backed securities are securities which are based on pools of underlying assets such as credit card receivables, mortgage loans, and automobile loans. They are said to be "backed" by assets because their performance is dependent upon the performance of the underlying assets.