Money market funds have become a key investment option for Kenyans. This is because of the various benefits they offer such as ease of investment and security. This article takes a deep dive into the top 10 money market funds in Kenya that you can use.
However, we first need to discuss the common terms associated with money market funds.
Collective Investment Schemes (CIS) in Kenya
Collective Investment Schemes are entities where investors pool funds and a fund manager invests the said funds on behalf of the investors. Some of the common types of Collective Investment Schemes include:
- Unit trusts
- Mutual funds
The major difference between unit trusts and mutual funds is the governing act. Unit trusts are governed by a Trustee act, while mutual funds are governed by a Company act. Since unit funds are much more common than mutual funds in Kenya, they will be the main focus of this article.
Unit trusts
A unit trust is a type of Collective Investment Scheme where investors pool funds and a fund manager invests the funds in money markets. Some of the common unit trusts in Kenya include:
- Money market funds – It is the most common type of unit trust
- Balanced funds – These are unit trusts that invest in both money market instruments and equities.
- Equity funds – They are unit trusts which invest a higher proportion in equities.
- Wealth fund – They are unit trusts to obtain an enhanced level of return.
What is a Money Market Fund?
A money market fund is a type of unit fund that invests pooled funds in low-risk, short-term financial investments such as treasury bills, fixed deposit accounts, and commercial bonds. Unit funds are managed by a fund management company and the investors are called unitholders.
In Kenya, Money Market Funds attract a 15% withholding tax on the returns. This is paid by the fund manager before disbursing the profits to the unitholders.
What is a fund management company?
A fund management company is a company that invests funds on behalf of its clients/investors. Currently, there are 24 registered fund managers in the country. These companies offer different investment services to clients depending on individual risk appetite and preference.
They pool the money collected from different investors, invest it in a specific instrument and distribute the earnings to the investors according to the amount contributed.
In Kenya, fund managers are registered by the Retirements Benefits Authority (RBA) and regulated by the Capital Markets Authority (CMA).
Benefits of Investing in a Money Market Fund
- Low risk
One of the properties of money market funds is that the funds are invested in short-term, low-risk investments. The low-risk property makes it suitable if you have a low-risk appetite, while still guaranteeing suitable returns.
- Ease of accessibility
One of the most favorable benefits of a money market fund is its high liquidity. Many money market funds in Kenya offer a maximum of 48 hours to receive your funds once you choose to cash in your funds. Therefore, you can easily access your money in case of an emergency.
- Better returns compared to bank accounts
On average, most banks offer a 4% return on funds in a savings account, which is much lower than the current inflation rate experienced in Kenya. however, money market funds offer a better return of approximately 6-7%. Therefore, saving money in a money market fund is better than saving it in a bank account.
Disadvantages of Investing in a Money Market Fund
- Low returns compared to high-risk investments
Since money market funds offer low risk, they come at the price of low returns compared to high-risk investments.
- Management fee
Money market funds involve a funds manager investing the money on your behalf. Therefore, the fund manager will charge you a fee for this service which will reduce your earnings. In Kenya, Sanlam charges the lowest management fee of 1.2% pa.
- Penalties/ Extra costs
Some money market funds limit the number of free withdrawals you can make on your account within a month. For example, CIC allows 2 free withdrawals per month and charges you Ksh 1,000 for every additional withdrawal made within a month. This can eat into your initial investment if you have little money invested.
Factors to consider before choosing a Money Market Fund
Some of the things to look out for before choosing an MMF include:
- Liquidity
Money invested in a money market fund should always be easily accessible. Therefore, consider the maximum wait time for your potential manager since this determines how long you will have to wait before you receive your funds; even in times of emergency.
- Return on investment
You should invest in firms that have a history of high returns on their unit trusts. A high return on investment is one of the main goals of investments, thus the possible return on investment should be a major consideration.
- Minimum investment amount
Different fund managers require a different minimum investment amount on their money market funds. Zimele has the lowest minimum investment amount of Ksh 100, making it easily affordable to many Kenyans. Therefore, choose a fund that has a minimum investment amount you can afford.
- Fees
Choose an MMF that charges you a low maintenance rate/fee to maximize your earnings. Expensive rates slowly eat into your earnings making your investment counterproductive.
- Customer service
Another important factor to consider is the quality of the fund manager’s customer service. A firm with good customer service makes it easy for you to seek assistance thus giving you peace of mind where your investment is concerned.
- Past performance
Although you should look out for funds offering high returns, you also need to consider the fund’s historic performance. Observe performance from the past 5-10 years and identify the average return from the fund.
Top 10 Best Money Market Funds in Kenya
1. CIC Money Market Fund
The CIC Money Market Fund is the largest Money Market Fund in Kenya by market share. It controls more than 30% of the Money Market Fund market in Kenya.
The main investments of the CIC MMF are Call and Fixed deposits with financial institutions regulated by the Central Bank of Kenya, Treasury bills, Government securities, and credit-rated or publicly approved Commercial papers with a maximum weighted average tenure of 13 months.
The fund also offers capital preservations and interest income credited monthly.
The fund has KCB Banks as its trustee, Co-operative Bank as its custodian, and PwC Kenya as the auditors.
Key Features
- Initial fee: Nil
- Annual Management Fee: 2% Per annum.
- Minimum Investment amount: Kes 5,000.
- Minimum Additional Investment: Kes 1,000.
- Effective annual yield: 8.71%
2. Sanlam Money Market Fund
Sanlam money market fund was founded in 2014 and boasts of the lowest annual management fee among all money market funds in Kenya. Similar to the CIC MMF, the Sanlam MMF offers capital preservation and monthly interest income. It follows a conservative investment approach thus suitable for risk-averse investors.
The primary investments of the fund are cash & bank deposits, treasury bills, and corporate debt.
Key Features
- Annual Management Fee: 1.2% Per annum.
- 12-month total expense ratio: 1.6%
- Minimum Investment amount: Kes 2,500.
- Minimum Additional Investment: Kes 1,000.
- Effective annual yield: 9.69%,
3. Cytonn Money Market Fund
Cytonn MMF is one of the top money market funds in Kenya in terms of annual yields. It invests primarily in tier II & III bank deposits, corporate notes, and alternative investments.
The fund offers high returns on low-risk investments and capital preservation. Similar to the Sanlam fund, interest is compounded daily. There is no entry or exit fee charged to the fund. The fund also allows for M-pesa deposits via a paybill number.
The Cytonn MMF used Goal Advisory Services as the trustee and the State Bank of Mauritius, Kenya as the custodian.
Key Features
- Initial fee: Nil
- Annual Management Fee: 1.5% Per annum.
- Minimum Investment amount: Kes 1,000.
- Minimum Additional Investment: Kes 1,000.
- Effective annual yield: 11%
4. Zimele Money Market Fund
The Zimele money market fund offers a secure and convenient platform to save money for the average Kenyan. it has the lowest required deposit of Ksh 100 making it very affordable to the average Kenyan.
According to their website, it is ideal for chamas, self-help groups, businesses and organizations, investment groups, and welfare groups for families, relatives, and friends. Interest is earned daily and compounded annually, making it ideal for both short-term and long-term savings. The fund also offers M-pesa deposits and withdrawals.
The custodian of the fund is Standard Chartered Securities Services Limited while the trustee is Kenya Commercial Bank (KCB) Trustee Services Ltd.
Key features
- Initial fee: nil
- Annual management fee: 2%
- Minimum deposit amount: Ksh 100
- Minimum additional investment: Ksh 100
- Effective annual yield: 9.56%
5. Old Mutual Money Market Fund
The Old Mutual MMF was launched on 24th March 2003. The fund invests in a well-diversified portfolio comprising treasury bills, corporate notes, bank fixed deposits, and bank call deposits. The fund guarantees immediate liquidity where you will receive funds in a few days. Returns generated from this fund are distributed monthly, and you can choose to reinvest the funds to grow your investment faster or transfer the funds to your bank account.
Similar to previous money market funds, it also allows M-pesa deposits.
The custodian of the fund is KCB custody services, the trustee is KEB ltd, and the auditor is Price Waterhouse Coopers (PwC).
Key features
- Initial fee: nil
- Annual management fee: 1% + VAT
- Minimum deposit amount: Ksh 1,000
- Minimum additional investment: Ksh 1,000
- Effective annual yield: 9.16%
6. Apollo Money Market Fund
The objective of the Apollo Money Market Fund is to obtain a reasonable level of return
while preserving the capital and offering income.
Key features
- Initial fee: nil
- Annual management fee: up to 2%
- Minimum deposit amount: Ksh 10,000
- Minimum additional investment: Ksh 2,000
- Effective annual yield:
7. Madison Money Market Fund
The objective of the Madison money market fund is to ensure that there is capital preservation and competitive returns to beat inflation while ensuring sufficient liquidity of withdrawal on short notice. The fund invests in short-term debt securities including treasury bills and binds and commercial financial instruments such as bank deposits and commercial papers.
The fund offers competitive yields that are 2% above treasury bills. Interest on the fund is compounded monthly and there are no penalties on any withdrawals made. The fund also allows M-pesa deposits via a paybill number.
The trustee of this fund is KCB Bank Kenya Limited, the custodian is Equity Bank Kenya Custodial Services ltd, and the auditor is Deloitte & Touche LLP.
Key features
- Initial and exit fee: nil
- Minimum deposit amount: Ksh 5,000
- Minimum additional investment: Ksh 1,000
- Effective annual yield: 8.96%
8. Nabo Africa Money Market Fund
The Nabo Africa Money Market fund was founded in November 2017. It invests in a mix of government and corporate short-term debt securities as well as certificates of deposit.
The trustee of the fund is KCB, the custodian is Stanbic Bank and the auditor is Grant Thornton. A unique feature of the Nabo Africa Unit trust is that it offers the USD version of the money market fund.
Key features
- Initial fee: nil
- Annual management fee: up to 2.5%
- Minimum deposit amount: Ksh 1,000,000
- Minimum additional investment: Ksh 10,000
- Effective annual yield: 9.2%
9. Dry Associates Money Market Fund
The Dry Associates Money Market Fund (KES) was formed on 1st July 2016. It aims to provide safety and income over the short to medium term by investing in a diversified portfolio of fixed-income securities with maturities of less than 18 months.
The fund composition includes bank deposits, Kenyan treasury bills and (short-dated) treasury bonds, commercial paper, and other near-cash equivalents with defined maximal asset allocations.
Interest income is paid out monthly, quarterly, semi-annually, or annually as selected by the investor. The fund is valued daily and the yield is available in the Daily Nation and Business Daily.
The trustee of the fund is Co-operative Bank of Kenya, the custodian is Standard Chartered bank and the auditor is Deloitte.
Key features
- Entry and exit fee: nil
- Total expense ratio: 2.49% p.a
- Minimum deposit amount: Ksh 1,000,000
- Minimum additional investment: Ksh 250,000
- Effective annual yield: 9.06%
10. Britam Money Market Fund
Britam money market fund was founded in 2006, with KCB Bank Kenya as the trustee, Standard chartered as the custodian, and PwC as the auditor.
The investment objective of the Britam Money Market Fund is to achieve a high level of yield while protecting investors’ capital. To achieve this, the portfolio is invested in fixed-income securities of various durations at attractive yields to ensure the return on the fund is maximized.
Money invested in the fund warns daily compounding interest and funds can easily be withdrawn within 48 hours. The asset allocation of the fund is in treasury bills & bonds, bank deposits, investment funds, and corporate securities.
Key features
- Annual management fee: 2% p.a
- Minimum deposit amount: Ksh 1,000
- Minimum additional investment: Ksh 1,000
- Effective annual yield: 8%
Conclusion
Investing your money in a money market fund ensures capital preservation while the money earns interest. Therefore, the top 10 money market funds in Kenya include:
- CIC Money Market Fund
- Sanlam Money Market Fund
- Cytonn Money Market Fund
- Zimele Money Market Fund
- Old Mutual Money Market Fund
- Apollo Money Market Fund
- Madison Money Market Fund
- Nabo Africa Money Market Fund
- Dry Associates Money Market Fund
- Britam Money Market Fund
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