Recently, Cytonn issued a media statement to defend their financial stability. However, the dented statement exposed them further. They claimed that Cytonn investments is the only investment management firm in East Africa that does real estate development for its clients.
Below we debunk what they had to say (italicised) and the reality of the matter.
Most investment managers invest client monies in fixed income, bonds, equities and bank deposits, which collectively have returned 10% to 12% per annum. Real estate has performed better, hence why we have an in-house development affiliate, Cytonn Real Estate, doing developments for our clients.
Other investment management firms have a reasonable risk appetite and do not consist of purely profit-minded individuals who think they have nothing to lose should the clients’ investments go up in smokes.
In fact, a report issued recently by Hass Consult shows that Real Esate is not one of the most promising investment fields in Kenya.
“It is clear that there is renewed confidence in the market but we are not yet out of the woods as the interest rate caps which have affected liquidity in the market pose a challenge,” Hass Consult’s Head of Development Consulting and Research Sakina Hassanali said during the report’s release.
Having an aged Chairman who has no clue on investment nor finance matters is a red light. The chairman, Prof Daniel Mugendi Njiru is an expert in agriculture, forestry and environmental policy and sustainability.
New ideas are always viewed suspiciously by established players; for example, when Equity Bank became a commercial bank 13-years ago, it was viewed suspiciously by established players, and from zero market capitalization, today it’s the largest bank by market capitalization. There is no question that our growth is threatening to established players.
Cytonn is obsessed on riding on the anecdotes of established firms such as Equity to hint theirs but in real sense the context and strategies employed are far apart. In fact, they go ahead to state how they were ‘successful’ in their previous company, which they left unceremoniously. Equity and other firms should advise them to stop quoting them when conveying their lies to the gullible investors.
Concerning using investors money to pay salaries, Cytonn says, “Client investments are held in separate accounts at a custodian bank. The Board of Cytonn Cash Management Solutions LLP is a separate company with a separate Board, which is made of investors.”
However, it is not in doubt to say that the funds are held by a custodian, who executes instructions given by Cytonn. How does that make it different from a normal bank account that you give instructions to send money here and there (even salary paying accounts). Let them come clean on where they pay their suppliers and salaries from.
The statement that clients who withdraw money have to wait about a week for their money is only correct for those clients who make premature withdrawals. The contractual agreement has provided that any investment withdrawal that shall be premature shall be paid within a period of 5-days. This is industry practice and similar to an investment with other houses. In most cases, with other firms, you will not even receive your accrued return over principal when you withdraw prematurely, which is not the case at Cytonn.
A very cagey style of tripping out of topic. As earlier highlighted, over 70% of their portfolio is in real estate, so let them explain how they pay their short term clients as real estate doesn’t take less than a year to develop and sell out. It’s simple, they take Peters money to pay Paul.
They even acknowledge that in their annual report page (95) which states,
“We draw attention to the fact that as at December 31, 2017, the Group had an excess of current liabilities over current assets of KSh2,869,864,147 (2016: Ksh 1,461,166,474).”
Next, Kahawa Tungu will show you how Cytonn has manipulated influencers, in bed with the auditor and how the CEO holds dual citizenship. He doesn’t even own a house in Kenya, despite selling houses to Kenyans.
Do you have a story you want told? Do you know of a sensitive story you would like us to get our hands on? Email your news TIPS to [email protected]