CMA publishes Guidance to Collective Investment Schemes on Performance Measurement and Presentation
Nairobi, 14 September 2020…The Capital Markets Authority (CMA) has today published new Guidance to Fund Managers of Collective Investment Schemes (CISs) on Valuation, Performance Measurement and Reporting (Guidance). The Guidance takes effect on 1 January 2021 and is expected to entrench international best practice in the capital markets by standardizing investment performance measurement and presentation by collective investment schemes.
‘The Authority has overtime noted inconsistencies in performance measurement and presentation in the collective investment schemes industry. These observations and feedback from the market necessitated the development of the new Guidance to enhance the comparability and consistency of information presented in performance reports generated by CISs’, said CMA Acting Chief Executive Wyckliffe Shamiah. The standardization of performance measurement and presentation is critical to investor protection and the fair treatment of customers.
‘The Institute of Certified Investment and Financial Analysts (ICIFA) supports the efforts by the Authority in standardizing investment performance measurement and reporting for CISs’. The Guidance will enhance accountability and transparency in the reporting of CISs’ performance which will in turn boost investor confidence. ICIFA looks forward to further collaboration with the Authority to provide capacity building to industry practitioners to ensure proper implementation and adherence to the Guidance’, said ICIFA Chief Executive, FA Diana Muriuki-Maina.
‘The Fund Managers’ Association (FMA) has been pleased to provide input to the Capital Markets Authority, which has been considered in the preparation of this Guidance. In particular, the FMA welcomes the clarity and standardization that the Guidance provides, and that it is aligned with global professional performance standards’, said FMA Chairman, Jonathan Stichbury.
Under the Guidance, fund managers will be required to establish comprehensive, documented investment policies and procedures to govern the valuation of assets held by a CIS. The said policies will identify the methodologies that will be used for valuing each type of asset and will clearly indicate how performance will be calculated, measured and presented. Fund managers will also be required to have policies and procedures in place to detect, prevent and correct pricing errors that result in material harm to CIS investors. The Guidance requires fund managers to provide performance measurement reports to the Authority and all existing and prospective investors, within 21 days after the end of each quarter.
In determining the total assets under management, fund managers will consider: - the aggregate fair value of all assets without double counting any assets, actual assets managed by the fund manager including fee-paying and non-fee-paying portfolios and assets outsourced to another fund manager.
Portfolios will be valued daily in line with the definition of fair value under International Financial Reporting Standards (IFRS 13). However, external valuations for real estate investments will be performed by an independent registered property valuer at least once every three years.
The Guidance intended for all CISs approved by the Authority will be read together with the Capital Markets (Collective Investment Schemes) Regulations, 2012. It is aligned to the Principles for the Valuation of Collective Investment Schemes by the International Organization for Securities Commissions (IOSCO), who is the global standard setter for capital markets regulation. The Guidance is also aligned to the Global Investment Performance Standards (GIPS).
BACKROUND INFORMATION ON THE CAPITAL MARKETS AUTHORITY
BACKROUND INFORMATION ON THE FUND MANAGERS ASSOCIATION
The Fund Managers Association (the FMA or the Association) is a Kenyan trade association established in 2008 to promote responsible and sustainable asset management. Membership in the Association is open to Capital Markets Authority (CMA) licensed organizations who manage institutional or individual investors’ funds. By investing in securities throughout East Africa, FMA members contribute to the growth, development and sustainability of Kenya’s capital market and economy. The FMA also supports its members and clients by actively engaging with policy makers, regulators, and other stakeholders through discussions and submission of ideas, proposals and concerns. These include the raising of ethical standards, development of new products, implementation of new regulations and training requirements.