ZCAS UNIVERSITY

NAME :MWANGALA NG’OMA

STUDENT NUMBER : BAA19234
COURSE : INVESTMENT PLANNING

LECTURER : MR WEBSTER SIKWAZWE

PROGRAMME : BFI212

SUBMISSION DUE : 25TH SEPTEMBER

 MUTUAL FUNDS IN ZAMBIA

A mutual fund is simply a pool of money from individuals which is therefore taken by
professional fund managers to invest in securities in order to grow the client’s wealth.

To begin with, firms in Zambia provide, which are listed down below with the information
about what they are involved in and their operations.

1. Equity funds - These are also known as stock funds. This scheme is offered to investors
or individuals who are interested in buying shares in companies. Shares can either
preference or common, which will be included in the packages offered by the mutual
funds. The fund managers advice investors on which shares are doing well on the market
and they also choose shares which will give their customers a better dividend.
2. Fixed income funds - These are known as Bond funds. In this type of scheme, fund
managers invest in debt securities or money market securities which are usually short
term. Such are such Government bonds, Treasury bills, corporate bonds etc. There are
very low risk because with government, you are assured that your investment (which is in
form of money) will be return to you. With the investment in bonds, you are assured of
coupon payments at every month, which will increase your profits.
3. Hybrid funds - This type of funds are a combination of equity funds and money market
securities (which are bond funds or debt funds). They are also known as Balanced funds,
this is because they offer some long term or medium term investments growth through
Equity and some steady income in short- terms goals through fixed income funds.
4. Money market funds - The money market consists of open-ended fixed income mutual
funds that invest in short-term debt securities, such as Treasury bills, municipal bills, and
short-term corporate (such as commercial papers) and bank debt instruments ( certificates
of deposits and banker’s acceptance) which have low risk [ CITATION Cor201 \l 1033 ]. You
won't get substantial returns, but you won't have to worry about losing your principal. The
return is a bit more than the amount you would get in a regular saving from the bank.
In Zambia we have a couple of securities that mutual funds could invest in for there clients.
Some of them are listed below;
Government bonds-A government bond is a debt instrument distributed by the Government
which is done through the Bank of Zambia. There are issued by the government to borrow
money from the public. These range from medium to long term with a minimum period of
two years. . They also come with a coupon/interest payment twice in a year and promise to
repay a face value on maturity date They are a good investment to those looking to invest in
long term.[CITATION Ban161 \l 1033 ]
Treasury bills- these are less risky securities, they are also issued by the government
which gives you an assurance that your money will be returned. They are short term
securities whose maturity date is from 90 days to sometimes 365 days.
Shares – these can either be common shares or preference shares, the fund managers
usually have select the stocks that do well on the Lusaka Stock Exchange in order to grow
their clients wealth. Another option is offshore equity which allows for to buy shares in
other countries.
Real Estate (property)- many of the mutual funds offer estate investment, which is
better or good investment for the long term investment. Investors are assured of an
income and an increase if the estate value increases.
The securities and exchange commission Zambia has many collective investment
schemes which are mutual funds that have been registered both locally and foreign. Some
of them operating locally are [CITATION Sec19 \l 1033 ]
 Laurence Paul Unit Trust Units
 Madison Assets Management Company Unit
 BancABC Unit Trust
 Kukula Capital Fund
Below is the description for each of these Mutual Funds
 Laurence Paul Unit Trust Unit - Laurence Paul is a privately held business reputable for a
full service in investment management and investment banking . It offers Investment
services to institutions and persons involved in investing and developing Africa's
productive infrastructure.[CITATION lau20 \l 1033 ]. Under their unit trust funds, they offer
a variety of portfolio that investors can chose from according to their risk profiles or their
objectives. The firm categorizes these portfolio into two groups, which are retails investor
and institutional investors/high net worth individuals. The retail investor group is usually
concerned in investing in portfolios that require a small amount of money whereas the
other group, involves large sums of money.
 Madison Assets Management Company Unit- is a Subsidiary of the LSA (Laurence
Sikuta and Associates) Group of which is Zambia’s leading private sector diversified
Financial services group. It began it operations in January 2008 and manages over 1.4
 billion kwacha of assets which consist of funds and client funds. It has been actively
involved in the capital markets, real estate and financial market. Their unit trust is suitable
for both retail and institutional investors who have the intentions in broadening of funds
and increased returns.[ CITATION MAD20 \l 1033 ]
 BancABC Unit Trust- ABC Unit Trust is a Collective Investment Scheme (CIS),
management African Banking Corporation Investments Services Limited T/A ABC
Asset Management and is partly owned by Atlas Mara Zambia, which currently manages
assets in surplus of K130 million. There investment approach applies strong
fundamentals of asset and investment options. They have a team of experienced
Professionals that offer investment services that cut across a widespread of investment
portfolios. They offer about 7 (seven) portfolio where you can chose your vehicle of
choice. According to their brochure they make money for clients through income, capital
growth and reduced cost of investment. They also plan on having a vehicle which
contains estate, those interested can soon invest in their real estate [ CITATION Atl19 \l
1033 ].
 Kukula Capital Fund – this a vehicle in the private sector in Zambia. It is partly owned by
Danish partners and it was formed in 2009. It is regulated by the SEC. The company
manages two main capital ventures which are the Kukula Fund 1 and the Kukula Seed.
They also offer advisory services to persons. One of the capital venture which is the
Kukula Seed was established in 2013 to find potential to build and operate upcoming
stage growth. The other one which is Kukula Fund 1 was formed in 2010, to find the
small business SMEs which have potential to grow and help them scale up. They invest in
Technology, forestry and other financial services [ CITATION KUK20 \l 1033 ].

With all the information above, I can conclude that mutual funds are beneficial to retail
investor. This is because mutual funds offer a way for retail investors make investments in
securities that are low risk which are at an affordable price. Mutual funds offers different
packages suitable for those individuals who would like to invest. They are a way in which
people can save money and also get back interest on the money they have invested.

Reasons for not investing would be that, the financial markets is under performed thus
causing a very low return and investors are discouraged in investing. Some mutual funds are
not diversified, they all have common portfolio which means that there’s little effort in
growing their client’s wealth therefore retail investors feel it is unnecessary to invest for a
small interest and would prefer saving cash with the bank. Retail investors can also decide
not invest in mutual funds because they are few people who invest in portfolio therefore
increasing the risk. Retail investors tend to want to invest with low prices which in some
mutual funds is very low. Example a mutual fund may provide a low package which starts at
K200 but the retail investor only has K50 there hindering the investment by the retailer.
References
AtlasMara Zambia, 2019. AtlasMara Zambia. [Online]
Available at: https://atlasmarazambia.com/wp-content/uploads/2020/07/ABC-UNIT-TRUST-
BROCHURE.pdf
[Accessed 18 September 2020].

Bank Of Zambia, 2016. Bank Of Zambia. [Online]

Available at: https://www.boz.zm/bonds.htm
[Accessed 14 September 2020].

Corporate Finance Institute, 2020. CFI Education Inc. [Online]

Available at: https://corporatefinanceinstitute.com/resources/knowledge/trading-investing/money-
market-funds/
[Accessed 18 September 2020].

KUKULA CAPITAL, 2020. kukulacapital. [Online]

Available at: https://kukulacapital.com/venture-capital/
[Accessed 18 September 2020].

Laurence Paul Investment Services, 2020. laurencepaul.com. [Online]

Available at: http://www.laurencepaul.com/application/files/6514/9511/0499/LP_Comp_Profile.pdf
[Accessed 18 september 2020].

MADISON ASSETS, 2020. MAMCo. [Online]

Available at: http://www.madisonassets.co.zm/index.php
[Accessed 18 September 2020].

Securities and Exchange Commission, 2020. Securities and Exchange Commission ZAMBIA. [Online]
Available at: https://www.seczambia.org.zm/registration/authorization-of-collective-investment-
schemes/
[Accessed 18 September 2020].