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Journeying Through Financial Terrains: Delving into the Dynamic Realm of Money Market Funds in Kenya


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Money Markets Funds  (MMFs) are currently one of the most popular investment vehicles in Kenya. This is because they invest in highly liquid securities like cash equivalents, government securities and highly-rated debt-based securities therefore having a high degree of safety. They also offer relatively high returns to investors than traditional savings accounts.

A money market fund is a mutual funds that invests solely in cash and cash equivalent securities, which are also called money market instruments. These vehicles are very liquid short-term investments with high credit quality.

Money market funds invest in short-term securities. By keeping a short time frame, these funds attempt to reduce uncertainty, which may help to manage risk. These funds are required to keep investment maturities to 397 days or less.

These are a low hanging fruit for beginners and are a good place to store your money. In Kenya, most MMFs have an interest rate of between 9-10% which is quite low considering the time to maturity. 

MMFs are particularly helpful to manage sinking funds (if you’d like to save for a large item, vacation, school fees etc.) or accumulate funds for investments that require larger sums of money. MMFs are also low risk, often easy to liquidate and require an initial investment of Kes 100 ($1)- Kes 100,000 ($10) depending on the particular fund. A MMF gives you  access to assets you may not otherwise be able to invest in, and earn from. These investments are known for their short maturity period, ranging from one month to one year, and they’re also considered very safe, given that they invest in low-risk options. While traditional savings accounts offer interest rates between 1% to 7%, money market funds routinely yield over 10% interest. Money market funds are invested in government and corporate debt securities that tend to outpace inflation, offering a better chance of preserving the real value of investments compared to conventional savings options.

What sets one Money Market Fund (MMF) apart from another? Consider these six  factors when choosing the most suitable fund:

1.Fund Performance: Evaluate the MMF’s performance based on the returns it offers, gauged through interest rates and dividends distributed to investors.

2.Minimum Investment Requirement: Different funds have varying minimum investment thresholds, with some accepting initial investments as low as 500 while others may set the bar higher at 100,000.

3.Minimum Top-Up Amount: After the initial investment, assess the subsequent amount you can add to the fund. Most MMFs permit top-ups in increments of 1000, though this amount may vary depending on the fund provider.

4.Management Fees: Consider the cost associated with investing in an MMF, known as management fees. These fees contribute to compensating the financial professionals overseeing the fund’s investment portfolio.

5.Ease of Withdrawal and Cash Access: A desirable MMF should offer convenient access to your funds without extended wait periods or penalties. Some funds facilitate same-day withdrawals through platforms like M-Pesa, while others may take three days or more.

6.CMA Approval: Verify if the MMF is registered with the Capital Markets Authority (CMA), the government body responsible for regulating all MMFs in Kenya. Legitimate funds must obtain approval from the CMA.

When selecting an MMF, a comprehensive assessment of these factors will help you make an informed decision tailored to your financial objectives and preferences.

Why invest in Money Market Funds

a) Scope for good return – Fund managers have various options to invest in; therefore, the portfolio gets diversified, resulting in MMFs generating equitable returns. MMFs also offer average returns of 8.9% that are higher than inflation rates of 6.5% and the rates offered by current accounts,

b) Liquidity – Money Market Funds provide investors with liquidity because they invest in securities that mature in short periods of time and can be easily liquidated for cash. This allows investors to come in and out of the funds at will

c) Regulatory oversight – MMFs are licensed and regulated by the CMA, which ensures the investments are made under the scope of the law. The functions of the Fund Manager, Custodian, Trustee and Auditor are separated, which contributes to the security of your investments, besides making MMFs low risk investments. CMA ensures all the operations of the MMFs are compliant with the guidelines laid out,

d) Low Minimum Investment amounts – Most MMFs have low minimum investment amount (as low as Kshs 1,000), which is affordable by people in most facets of the economy. This provides the opportunity to invest and grow your income,

e) Low costs of Investment – Due to the large amount of funds that the Fund Manager manages, very low costs accrue per investor. The Fund achieves economies of scale in research, transactions and investments,

In conclusion, money market funds offer liquidity and accessibility allowing investors to withdraw their funds on short notice, which makes them suitable for both short-term and long-term financial goals.

It is essential to acknowledge that money market funds may not offer the same potential for high returns as riskier investments such as stocks or real estate. However, they are designed to provide stability, liquidity, and a reasonable return on investment over time.

By diversifying their savings and investment strategies with money market funds, Kenyans can take a proactive step toward financial resilience and stability in an ever-changing economic landscape.

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