S7:E7 | What Is A Call Account? | Rina Hicks | #CiS

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Head Office
Address: Crawford Business Park,
State House Rd, Nairobi Kenya.

OAK Special Fund is a Leveraged Asset Allocation Fund domiciled in Kenya. It offers investors a unique opportunity to access both local and global markets. The fund is managed by Faida Investment Bank and is licensed by the Capital Markets Authority as a Special Collective Investment Scheme (CIS).

Key Information

Inception Date: February 2024
Base Currency: Kenya Shilling (KES)
Minimum Investment: KES 1,000,000
Minimum Top-up: KES 100,000
Lock-in Period: 6 months
Fund Manager: Faida Investment Bank

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What is a Call Account?
A call account is a type of account offered by commercial banks, distinct from current, savings, and fixed deposit accounts. It allows you to place your money in the bank with the flexibility to "call" or access it whenever needed. While your money is in the account, it earns interest, typically higher than a standard savings or current account but lower than a fixed deposit account, where funds are locked for a set period.

Here's how it works:

You deposit a significant amount of money into the account (call accounts are typically suited for larger sums like a million shillings or more).
The bank holds the money, and it earns interest while being available for withdrawal at short notice.
The interest rate on a call account depends on the amount of money deposited. Larger amounts usually earn higher rates.
This account is ideal for situations where you may need to access the funds soon but want to earn some interest in the meantime, rather than letting the money sit idle in a current account.
Rina mentions that interest rates on call accounts fluctuate depending on market conditions and the amount deposited. While someone with a million shillings might earn around 13% interest, those with larger amounts (e.g., 50 million or 100 million) could negotiate rates as high as 17%.

Can Individuals Access a Call Account?
Yes, individuals can open call accounts, though they typically need to deposit a substantial amount of money, usually starting from around a million shillings. The bank offers flexible access to the funds while still providing interest.

Call Accounts in Fund Management
Rina also explains that funds such as money market or special funds often use call accounts to manage liquidity. Since these funds deal with large amounts of pooled money from multiple investors, they can negotiate better interest rates with banks than an individual investor would. For instance, a fund with billions of shillings can secure higher returns due to the scale of the investment.

Fund managers, like those at Faida Investment Bank, strategically place a portion of the pooled money into call accounts to ensure it's earning interest while being easily accessible for short-term needs. The custodian, typically a bank, holds the funds on behalf of the investors and follows the instructions of the fund manager on where to allocate the money.

The Role of the Custodian
In the case of a fund, the custodian plays a crucial role in safeguarding the assets. The fund manager, like Rina’s team at Faida, instructs the custodian on where to allocate the money (e.g., which bank offers the best rates), but the custodian is responsible for actually moving the funds and holding them on behalf of the investors. This arrangement ensures transparency and accountability.

Conclusion: Maximizing Returns through Call Accounts
A call account is an excellent tool for individuals or funds with significant amounts of money that need to remain accessible in the short term. By placing money in a call account, you can earn interest while keeping your funds available for when you need them.

Fund managers use call accounts as part of their broader strategy to maximize returns for investors, particularly when managing large sums of money through a collective investment scheme. For individuals, understanding the use of a call account can help them make smarter decisions about how to handle short-term cash reserves.

What is a Special Fund?
Rina briefly mentions special funds, which are more flexible than traditional funds like money market or fixed income funds. A special fund allows for investment in various asset classes and markets, often with a more customized strategy approved by the regulator. This type of fund can invest in diverse opportunities, from global stocks to unique local markets, depending on the fund’s objectives. Special funds are usually structured to meet specific investor goals and may not adhere to the more rigid guidelines of other collective investment schemes, although they remain regulated and transparent.

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