Kenyans have flocked to US dollar-based investments in a move aimed at cushioning them against the effects of a weakening local currency.

The drive towards dollar denominated investment products by both domestic and diaspora investors has seen fund managers set up forex investment vehicles in response to the demand from clients.

Last year, for instance, the Capital Markets Authority (CMA) granted approvals to multiple fund managers to set up dollar denominated money market funds and fixed income funds as the Shilling saw its sharpest depreciation against the dollar in three decades. Between April and June last year, the CMA gave approvals for the registration of the Old Mutual Dollar Money Market Fund.

This was followed by the registrations of the ICEA USD Fixed Income Fund and Sanlam USD Fixed Income Fund in the third quarter of 2023 and the registration of Etica USD Money Market Fund, Etica USD Shariah Fund, Etica USD Wealth Fund, Etica USD Fixed Income Fund and Enwealth Dollar Money Market Fund.

According to the CMA third quarter statistics on collective investment schemes, assets under management in dollar-denominated funds stood at Ksh12.3 billion ($75.7 million), compared with just Ksh5.1 billion ($31.4 million) in September 2022.

“The main reason for interest in dollar investments is that the Kenya Shilling has been depreciating against the US dollar, and there is demand from investors who want to hedge against the currency depreciation. Yields on Kenyan Eurobonds have also rallied presenting the opportunity for fund managers to package dollar-based products,” Kenneth Maina, co-founder of Etica Capital said.