In a span of three years, the company has grown in leaps and bounds to become one of the most preferred fund manager
In recent times, the fund management scene has been busy. The launch of Nabo Capital in April 2013 took the industry by storm. A wholly owned subsidiary of Centum Investment Company Limited, Nabo, was merely a department – the quoted private equity (QPE) division within the group that spinned off to become a fully-fledged entity with its own structures.
According to Nabo Capital’s managing director, Pius Muchiri, the need to establish the fund manager was linked to the success of Centum. “Many people came to Centum saying they liked our story, our track record, and the fact that the company knows how to create wealth. They wanted to participate and imitate our track record without necessarily having to buy Centum shares in the stock exchange.”
Going down memory lane
In 2009, the company embarked on a revolutionary five-year strategy dubbed Centum 2.0. “We were very deliberate. We separated the portfolio into three divisions – private equity, real estate and quoted private equity,” says Pius. These business lines were separated in order to generate unique track records for each and use them to attract investors. Pius took leadership of the quoted private equity division that dealt with public markets under Centum, which later transformed to Nabo Capital.
“In the same year, we were given a portfolio of about Ksh. 2.3 billion and within a period of six years, we were able to generate revenues equal to Ksh.7.2 billion,” recalls Pius.
The company was only one percent exposed outside Kenya. “We had made a thoughtful decision to have at least 50 percent of the portfolio extended outside Kenya,” he says. This was successful adding that “In 2014, we had a presence of about 63 percent outside Kenya. 80 percent of the revenues came from that market. We are literally importing gross domestic product (GDP) into the country.”
Without a doubt, the division proved successful and the opportunities that were coming across were much bigger than they could be accommodated at Centum. The need for a platform that could help them to co-invest with other investors was essential.
Pius points out that he spent a lot of time trying to justify why the market needed another fund manager. The conclusion was that the market was desperate for a new and wider variety of assets. It therefore needed a player that could expand the investment. “For instance, in the last 10-15 years, the number of equity stocks in the stock exchange were around 55 – 60 stocks. In 2011, total pensions in the market were Ksh. 245 billion. In 2015, pension assets were close to Ksh. 900 billion. In 2008, foreign investor participation in daily turnover at the stock exchange was minimal.” However, the listing of Safaricom provided more publicity allowing the local capital market to attract more prominent international investors. Today, foreigners command 60 to 80 percent daily turnover at the stock exchange.
In 2013, Nabo Capital received a license from the Capital Markets Authority (CMA) to manage third party funds.
Role of Nabo
Nabo is playing a major role in the industry by bringing new products into the market. The fund manager is one of the licensed Real Estate Investment Trust (REIT) managers.
The unit trust investor is allowed to invest outside of Kenya. This means that any Kenyan today can access opportunities in any place across Africa.
Furthermore, Nabo plays a key role connecting investors with lucrative projects. “We play an advisory role in helping foreign investors, especially those who are looking for opportunities in the investment market to identify them,” observes Pius.
Investors understand that Africa is the next frontier and therefore they would like to have a piece of it. However, they do not have any means of accessing the continent. In this regard, Nabo plays a pivotal role of selling Africa to the rest of the world. “We educate foreign investors and help them identify local opportunities. They also use us as their avenue for channeling their funds into Africa,” says Pius. Currently, Nabo is the asset manager of some of the most coveted global funds in the world.
Nabo targets institutions and high-net worth individuals.
“We are in the business of making people rich,” quips the executive. “However, people become rich differently because they have different risk appetites,” he adds. With reference to this, individuals are taken through a process in order to understand their financial goals and risk appetite. “We also consider other factors, such as, some people desire to grow their portfolio relatively fast while others are interested in a portfolio that generates income.” The process is normally formalized through a document called an Investment Policy Statement.
Pius observes that the company has a unique set of people. “The Nabo DNA cascades from the Centum Group. The DNA is what determines the kind of individuals who are likely to succeed in Nabo and is really what sets us apart from the rest. We have an elaborate Graduate Trainee programme that allows the company to grow its talent from the bottom going up.”
The managing director notes that this is the only way one can join the team, unless on very rare occasions when there is need to source experienced individuals.
Moreover, the company has fourteen golden rules which act as guidelines that help the staff to build a culture of high performance.
Pius, a chartered financial analyst, has been with the Centum Group for almost 12 years. He says he is the typical Centum DNA that has grown through the business. “I have been involved in the transformation of Centum and that transformation continues within Nabo Capital.” He has gained broad and rich experience including setting up the business from scratch, developing processes, recruitment, product development, systems structuring and branding among others.
“In the last three years, we have learnt a lot and we have been able to set up systems, processes and teams and at the same time managed to remain profitable. Within that period, we were named top four in the industry in terms of revenues and profitability,” offers Pius. “We are in a strong position now in terms of clarity of products offered and relevance in the market,” he adds.
Kenya has become a preferred destination for capital. The diversified nature of the economies is our strength therefore attracting a lot of capital destined for public markets and private equity opportunities. “I am therefore very optimistic about the future,” he concludes.