Breaking Down the 16 Percent Return From Cytonn Investments

By Soko Directory Team / Published April 5, 2019 | 4:43 am





A piece I wrote a couple of months ago received a lot of attention. Most of the comments I got were from people wanting to understand how exactly Cytonn, the company I wrote about was able to give clients a 16% return and still maintain a profit. Even banks don’t give you that much! As a responsible member of the fourth estate, I felt that a little more digging was due.

I sat down with a financial advisor from the firm and had him break down Cytonn’s investments model for me. CHYS, or Cytonn High Yield Solutions, is a private investment product that the company offers to pre-qualified investors. This is the product that attracts 16% returns – the company offers many others.

For CHYS, you give them your money, they invest it for you and then from the returns, they pay you interest. Every other investment company does this; it’s only that CHYS offers above-average rates, and this raises many eyebrows. What is this thing that Cytonn invests in that allows it to comfortably give you such high returns?

For the most part, real estate.

Say, for example, you put 1,000,000 shillings into CHYS. CHYS will lend out your money at an interest of 21% to an investment vehicle, usually one of Cytonn Real Estate’s projects. This means the project has to pay back 1,210,000 shillings eventually. In order to do this, the project has to make money, which it does by selling units off-plan.

Now, because the company has done its research, it only puts up projects in areas that perform well consistently. I noticed that they only focused on developments in Karen and Kiambu. Due to factors such as good infrastructure, and access to malls, high-end schools, and embassies, real estate does well in these areas, attracting returns of 25% on average.

From the 1,000,000 shillings you loaned them through CHYS, the development has made 1,250,000. It then repays its 1,210,000 loans to CHYS, which then pays you 160,000 (16%) each year as interest. The 50,000 shillings difference caters for CHYS’s operational costs. Eventually, when you want your one million shillings capital, you get it back.

Isaac Newton once said that truth is ever to be found in simplicity, and not in the multiplicity and confusion of things. What’s simpler than Cytonn’s model? They cut out banks (the middlemen) by borrowing directly from you, the investor, and investing in actual, tangible real estate projects, which have been proven to continuously offer great returns. Now I don’t know about you, but I would rather put my money in a high yielding investment product than settle for the less desirable alternatives out there.

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About Soko Directory Team

Soko Directory is a Financial and Markets digital portal that tracks brands, listed firms on the NSE, SMEs and trend setters in the markets eco-system.Find us on Facebook: facebook.com/SokoDirectory and on Twitter: twitter.com/SokoDirectory

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