Despite a culture where saving has never been second nature, unit trusts are taking off in Uganda. As of June 2025, Capital Markets Authority (CMA) figures show that the industry managed more than Shs4.5 trillion-up by 8.6 percent from March (Shs4.22 trillion) and 44.4 percent year-on-year from Shs3.17 trillion.
The number of funded collective investment scheme (CIS) accounts reached 148,843 by June 2025. The CMA links this growth to ‘a robust regulatory framework that has fostered investor confidence, as well as increased public awareness.’
In plain terms: people trust the system more, and they understand it better.
And that’s because the regulator has previously tightened licensing rules, enforced reporting standards, and pushed fund managers to be more transparent.
With a growing economy, longer lifespans, and rising incomes, Ugandans will face increasing pressure to set aside money for the future. State pensions and employer schemes cannot carry the weight alone.
That shift gives individuals a bigger role in shaping capital markets. Financial firms-banks, insurers, asset managers-will no longer compete just to lend or underwrite policies; they’ll compete for long-term savings.
To win, they would need to deliver choice, transparency, ease of access, good returns, and low fees. Meanwhile, financial markets-government securities, bonds, equities-would feel the pull of these growing individual capital flows.
As in developed markets where pension and mutual fund money drive stock exchanges, Uganda too may see more volatility, new investment products, and deeper capital markets. And as ordinary people enter these markets, they would also have to learn how to balance opportunity and risk.
What’s the concentration risk?
It’s just a few players dominating assets. The top two managers control 78.5 percent of assets under management (AUM). Old Mutual Investment Group alone held Shs3.01 trillion, while ICEA Lion Asset Management managed Shs587.3b as of June 2025. Add Sanlam’s Shs406.7b, and the top three controlled about 87 percent of the Shs4.585 trillion industry total.
The upside is stability and trust. Big brands bring scale, capacity, and national distribution networks-important in a young market. But the downside is equally clear: less competition, slower innovation, and greater systemic risk if a single manager falters.
The regulator is aware of this imbalance. In its latest bulletin, the CMA said it is ‘encouraging innovation to reduce concentration-through disruptive models, stronger investor education, and tech-driven solutions for smaller managers.’ Signs of this are emerging. Mid-tier firms are growing rapidly, even from small bases. SBG Securities boosted its CIS assets by 48.8 percent in one quarter, from Shs145.2b in March to Shs216b in June.
Cornerstone Asset Managers nearly doubled, up 77.4 percent from Shs18.6b to Shs33b. Nimble players with targeted products and better technology are starting to chip away at incumbents’ dominance. But the real weakness lies in product diversity.
Portfolios remain overwhelmingly tilted towards fixed income. By June 2025, government bonds made up 64.5 percent, fixed deposits 15.6 percent, Treasury bills 9.3 percent, cash and call deposits at 4.8 percent, and corporate bonds, commercial paper, and Eurobonds about 6.0 percent.
Equities-local and regional-barely registered at 0.06 percent. As CMA notes, ‘funds whose underlying investments are interest-bearing continue to dominate.’ In practice, Uganda’s CIS portfolios behave more like enhanced fixed deposits-safe, income-focused vehicles rather than diversified mutual funds. The imbalance is striking: of Shs4.585 trillion in CIS assets, just 0.06 percent-about Shs2.75b-is in equities. That’s only 60 cents for every Shs1,000 invested.
What does this represent?
Two things. Firstly, investor preference-Ugandans mainly use CIS to earn stable income, not equity-driven capital gains. And that’s why risk appetite remains conservative, shaped by familiarity with bonds and attractive government yields. Secondly, market depth-Uganda’s equity market is too shallow to absorb major retail flows.
Free float is limited, daily trading is thin, and equity fund products are underdeveloped. Even if investors wanted to shift meaningfully into equities, the market lacks the room to handle it without distorting prices.
A subtler trend is the rise in cash allocations-from 0.3 percent of AUM in June 2024 to 1.0 percent in June 2025. This shows maturing liquidity management. As CIS pools expand, managers must hold more liquid assets to handle daily redemptions. Cash buffers allow smooth withdrawals without forced sales of bonds or bills-protecting remaining investors.
Though small in percentage terms, in absolute numbers it represents tens of billions of shillings, underscoring how scaling up AUM changes the operational dynamics of fund management.
The bigger picture is that the savings industry is growing fast, but its power sits at the top and its assets sit in bonds. That combination makes it look stable today, but leaves it fragile tomorrow if interest rates shift or if one dominant player stumbles.
What does this mean for investors?
That structure is both a strength and a vulnerability. Its heavy fixed-income tilt has served investors well during a period of high and relatively stable interest rates. Government bonds and fixed deposits have delivered predictable income streams of as high as 17 percent-exactly what cautious savers want.
When Treasury yields hover in the mid-teens, the logic is why risk equity volatility when you can earn double-digit returns from a sovereign issuer with no lock-in? For many retail investors, CIS funds function like ‘super savings accounts’-low risk, easy to enter and exit, and consistently better than bank deposits.
But this makes the industry highly sensitive to interest-rate shifts. If rates fall-because of fiscal consolidation, easing inflation, or a change in Bank of Uganda’s policy stance-CIS yields will drop. With portfolios dominated by bonds, performance is tied more to macroeconomic conditions than to active management. The tiny equity allocation offers almost no cushion.
In mature markets, balanced or equity-heavy funds provide growth through corporate earnings even when rates decline. In Uganda, the near-absence of equities means bond cycles dictate returns, with few alternatives to offset dips.
The CMA has flagged this risk. It has urged managers to diversify into equities and structured alternatives, broadening resilience and offering savers more risk-return options. As the quarter two market bulletin notes, ‘it is imperative that fund management players explore innovative ways of tapping into Uganda’s demographic structure that is skewed towards the youth and explore allocating a lot more to alternative investments.’ Uganda’s CIS industry has mastered the fixed-income playbook.
The next challenge is building portfolios that can thrive across interest-rate cycles, not just during bond booms.
That requires deeper equity markets, credible alternative products, and more adventurous-but disciplined-fund strategies. This challenge is pushing some managers to rethink.
Simon Mwebaze, managing director at Cornerstone Asset Managers, warns: ‘We’ve seen massive rejection of bids, like with the 25-year bond auction. There has to be some scratching for opportunities outside government. The regulator should consider broadening the landscape-maybe offshore.
Global trends like Artificial Intelligence (AI) are driving some asset classes up 30, 40, even 1,000 percent over five years, while we clap for 13 percent here.’
John Kamara, country manager at XENO Investment Management, highlights a different approach: tailoring portfolios to member objectives. ‘We give our members exposure across four asset classes-money markets, long-term bonds, domestic and regional equities-based on their risk profile and goals. It’s about matching portfolios to life objectives like buying a house..’
This contrasts with the National Social Security Fund (NSSF), which pools member funds and deploys them wholesale, with little customisation. For a fund of its scale-$6-7b globally-deployment options are limited. The constraints are real.
Many of these fund managers have a fiduciary duty to preserve capital, provide liquidity for redemptions, and manage social and political expectations. But these same constraints keep Uganda’s institutional fund managers locked in government securities. And that dependence is a paradox of its own.
Speaking of paradoxes, do interest rates present one?
High interest rates look like a gift in the short term-delivering 16-17 percent returns to members’ assets under management. But if they remain elevated for too long, it signals deeper economic weakness. This is the dilemma for institutional managers and collective investment schemes, whose portfolios lean heavily on government securities. Election years often bring expectations of surging yields, but the outcome is never guaranteed.
‘There’s always a different twist in every election period. Our sense is rates won’t rise much higher because the Treasury is actively managing them. In the short term, higher rates may benefit funds and members, but you don’t want a prolonged period of elevated rates-that points to deeper problems in the economy and financial sector,’ Kamara says.
The logic behind Uganda’s fixed-income bias is clear: mid-teen yields are attractive, reliable, and require far less effort than equities. Equities demand extra manpower, analysis, and risk-taking, yet returns are uncertain. For most fund managers, bonds are the easier, safer bet.
This dynamic stands in sharp contrast to developed markets. In the US, government securities yield barely 3.0 percent. To achieve better returns, investors must turn to equities, where dividends can hit 10 percent but come with volatility.
So, as long as Uganda’s portfolios remain tied overwhelmingly to bonds, performance will swing with the yield curve, not with real diversification.
The alternatives
Finding alternatives to government bonds isn’t easy for Uganda’s fund managers. The system itself makes it hard. First, there are few private assets to invest in, little deal flow, almost no secondary markets, and weak governance. If managers try to take big positions, they risk being stuck with assets they can’t easily sell.
Second, alternatives like real estate, private equity, or offshore assets need specialist research, legal structures, custodians, and auditors.
That pushes fees up in a market where investors don’t like paying more than the usual 2.0 percent on unit trusts. If fees rise to 5 percent, many Ugandan unit holders would walk away. Third, alternatives bring currency risks, irregular cash flows, and complicated reporting. But investors want daily access to their savings. That promise of quick liquidity clashes with the slow, complex nature of alternative assets. With government bonds paying safe mid-teen returns, managers already look good sticking to fixed income.
Few want to risk their careers on illiquid or volatile assets that are harder to explain when markets turn. For pensions, the Uganda Retirement Benefits Regulatory Authority’s investment regulations push most money into East African government securities and listed shares, effectively blocking offshore options.
For unit trusts, offshore or unusual assets aren’t banned, but they require that ‘the fund’s eligible markets and assets are hard-wired into the scheme documents and approved by CMA-plus you need offshore custody, forex risk management, and robust disclosure.’
That makes them expensive and complex to set up. The challenge, then, is not just product design but affordability and regulatory openness.