Lucrative online forex bogged by negative perceptions
Licensed forex brokers continue to grapple with negative perceptions brought about by massive losses at the hands of unlicensed local and foreign players.
Effects of the COVID-19 pandemic have slowed down activity on financial markets. This has limited investment options with reasonable returns. However, opportunities still exist.
One such opportunity is Mansax, a fund managed by the Standard Investment Bank (SIB) that taps into global online foreign exchange markets. It is a multi-asset strategy fund that grants investors access to global markets in asset classes, such as: currencies, commodities, precious metals, global stock indices, global single stocks, cash and cash equivalents.
In its Q3 2020 results, the fund reported an Annualized Return of 23.3% for the first nine months of the year. In 2019, the delivered return stood at 24%.
“Mansax takes a long shot trading model that thrives in market volatility and turbulence. It offers diversification away from the traditional asset classes and takes advantage of upsurges and drops of asset classes such as gold and oil. This makes it a better option in these times,” explains Victor Marangu, Head of Sales and Marketing at SIB.
Launched in 2019, Mansax is Kenya’s first and only online forex trading money manager regulated by the Capital Markets Authority (CMA). In addition to this, CMA has issued three non-dealing online foreign exchange brokers licenses to EGM Securities Ltd, SCFM Limited, and Pepperstone Markets Kenya Ltd.
Just about a year since launch, Mansax currently holds over KSh2.2 billion in assets under management.
According to Mr Marangu, the minimum investment into Mansax is KSh250,000. A prospective investor does not need to be have expert knowledge, since complexities would be handled by a portfolio manager.
“Our approach is not to commoditize Mansax but make it solution-based. Our financial advisors engage prospective investors, walk them through the financial planning journey and set investment objectives. It is based on this that they determine together the best route to take. If they are deemed fit for Mansax, the necessary KYC (Know Your Customer) processes are run, before documentation and onboarding,” he explains.
This paves the way for the prospective investor to open a Mansax account, fund it and begin investing. It has the advantage of easy access to liquidity within 24 hours, hence the inclusion of cash and cash equivalents.
“So far, the fund has performed exceptionally well and built investor confidence. When Kenyans identify an investment opportunity that is genuine, they are willing to take it up,” the SIB Sales and Marketing Head adds.
However, Mansax, like other licensed forex brokers, has had to grapple with negative perceptions towards the asset class due to massive losses at the hands of unlicensed local and foreign players.
So great has the disquiet been that the CMA issued a cautionary statement threatening enforcement action against these illegal online forex traders.
“CMA requires all online foreign exchange brokers or money managers not licensed by the Authority to cease and desist from trading, conducting sensitizations in Kenya and onboarding Kenyan investors or managing online foreign exchange portfolios,” CMA stated.
In August 2020, Kenya’s financial services industry regulators also put out a public notice, warning the public against rogue online foreign exchange brokers and traders, among other fraudulent and unlicensed financial schemes.
“These entities promise customers huge returns and are not licensed as required, either as online forex brokers or traders by the CMA or as forex dealers by the Central Bank of Kenya (CBK),” said the statement that was signed by CMA, CBK, Retirement Benefits Authority, Insurance Regulatory Authority, Sacco Societies Regulatory Authority and State Department of Cooperatives.
Mr Marangu says that there is also need for serious investor education to build the public’s understanding on global investment opportunities and how to access them safely.
“When information is lacking, opinions form and cement perceptions. The investor education needs to cut across and even be inculcated into our education system. Personal finance issues need to be made a common unit in our university curriculum, the same way we have done for basic communication skills,” he argues.