The 9 Best Money Markets Funds in Kenya

Investing in money markets funds in Kenya and the world all over is a great way to diversify your investment while earning competitive interest rates. These funds accept contributions from many investors, pool them together, and invest in short-term debt securities such as treasury bills and certificates of deposit.

Generally, money market funds are for investors who want to earn more interest than they would in banks but also keep their principal safe. In this article, we look at everything you need to know about money markets Kenya and how to choose the best.

Money markets funds Kenya
Money Markets Kenya

What is a money market fund?

Money markets funds, also known as money market mutual funds, are safe investment vehicles that can earn you a modest interest on short-term investing ranging from one day to a year. They provide an excellent investment opportunity that is low risk, short-term and has great liquidity.

Money market funds in Kenya invest in the following instruments

  • Government treasury bills –

These are short-term money market instruments issued and backed by the government. They have little or no risk and mature in one month to a year. Treasury bills mature at certain dates as they are used to cover government financing deficits. Treasury bills are issued to an investor at a discount or face value 

In Kenya, you will need a minimum of Ksh 100,000 to invest in treasury bills. The government issues 91-, 182- and 364-day treasury bills.

For instance, if you have Ksh 100,000 and want to invest in 364 days treasury bills at a 10% yield, you can expect the returns to be as follows. Please note you will have invested 92,292.

You will receive the Ksh 100,000 upon maturity

  • Treasury bonds

Treasury bonds are securities that government uses to get money from investors for a specified period. They are short-term to long-term securities. Investors receive fixed interest payments every six months over the period the bond is in effect. At maturity, they receive the face value amount they had invested

The minimum amount you can invest in treasury bonds is Ksh 50,000

  • Commercial papers

Commercial papers are issued by large well-known companies, and they are unsecured. The main aim of a commercial paper is to provide liquidity for the company.

  • Short-term debt guaranteed by commercial banks
  • Bank-issued saving certificates with short-term maturity
  • Unsecured short-term corporate debt

In Kenya, money markets are offered by investment companies, financial institutions, and insurance companies. They are regulated by the capital markets authority (CMA).

The money market funds provide investors with one of the best options to grow their money. If you are wondering how to grow your money the money markets in Kenya is a great place to start. For instance, if you are wondering what to do with that Ksh 100,000 savings then look out for money markets.

Before we can take you through how money markets work let us look at some of the most common terms.

  • Funds pooling is where investor bring their funds together through a manager for investment
  • Collective investment schemes

Collective investment schemes (CIS) in Kenya are entities that pool money and invest the funds in various investment options. CIS has fund managers whose main duty is to manage the pooled funds and ensure a return of income for the investor. There are 3 collective schemes in Kenya.

  • Unit trust Kenya
  • Mutual funds Kenya
  • Employee ownership plans.

In this article, we look at money market funds which is a type of unit trust.

What are unit trusts?

Unit trusts are CISs that pool investors’ money into a single fund and invest the same in money markets, shares, bonds, and equities. Unit trusts are managed by fund managers. They are established through a trust deed and the investor is the beneficiary.

Here are some types of unit trust

  • Balanced Funds.
  • Equity Funds.
  • Exchange Traded Funds (ETF)
  • Fixed Income Funds.
  • Index Funds.
  • International Equity Funds.
  • Money Market Funds.
  • Real Estate Investment Trusts (REITS)

How money markets funds work

In simple terms the money market funds manager pools money from investors and invest the money in different instruments.  Mostly money markets funds maintain an asset value of Ksh 1 per share. Fund managers issue details about the fund and you can choose whether those are the kind of returns you need.

Here are some of the fund details you need to check

  • The classification which in this case is a money market fund
  • Information about the fund objective
  • Risk profile-Money markets are low risk, and you are likely to see conservative
  • Inception date which is a date when the fund begins
  • Minimum investment which is the minimum cash requirement
  • Portfolio size is the total value of the instrument
  • Income distribution frequency is how often you can expect your interest
  • Annual management fees are the amount that goes to the fund manager for managing your money. The management fee is a percentage of the asset value.
  • Minimum and maximum expected returns

The fund managers are regulated by the Capital markets authority and issue the investors with shares or units.

How often do money markets pay interest?

If you invest in money markets funds you will receive a monthly or a yearly interest on your principal amount. The interest you receive depends on the applicable rate from the fund managers.

Money market yield is the interest earned by investing in instruments with high liquidity and maturity of less than one year. The interest is quoted yearly but the quoted interest can be compounded semi-annually, quarterly, or even daily.

The money market yield is calculated using the bond equivalent yield which is a metric that lets investors calculate the annual percentage yield for fixed income securities.

In simpler terms,

Option 1

Money market yield is

Money market yield =Holding. Period yield x (360/Time to maturity)

Money market yield = (Face value-purchase price/purchase price) x360/Time to maturity)

For example, a T-bill face value is Ksh 100,000, and it’s issued for 92,292 and is due to mature in 360 days.

=100,000-92292/92292(360/360) =8.35%

Option 2

The money market yield is calculated using the bond equivalent yield which is a metric that lets investors calculate the annual percentage yield for fixed income securities.

Annualized yield is the real rate earned on an investment taking into consideration the effect of compounding interest.

Advantages of money markets

Putting your money in the money markets has several advantages. Here are the main ones

  • Great place to park your money

When the stock is extremely volatile and you are not sure where to invest your money, look at the money markets. The reason is money markets are less risky and there is no likely hood of losing your money.

  • Money invested in money markets is highly liquid

Money markets have high demand, and this means they are highly liquid. You can get your money quickly.

  • Safety of your money

Money markets are generally safe and there are minimal chances of losing your money.

  • Higher yield

Compared to savings accounts they offer a relatively higher yield. This makes them a better option instead of saving your money.

How to choose a money market fund

In Kenya, there are several money markets fund, how to choose the right one. Here is how to select the best money market fund.

Portfolio

The portfolio is the collection of instruments that make up the money market fund. Review the debt instruments in the fund and ensure there is minimal risk. Money markets funds in Kenya invest mostly in cash deposits, corporate bonds, treasury bills, and bonds.

Check to see the composition of the fund portfolio as this determines the riskiness of the fund.

Yield

You will want to choose a fund that offers the best yield. Yield is the percentage of interest you can expect at maturity. Compare the yield between different money market funds.

Fees

Fund managers will charge management fees and other fees to invest and manage your money. Find the one with the lowest fees. It’s also important to know how the fund calculates management fees. Is it based on the overall value of the asset or the gross interest of the fund.

Risk

Money markets are generally safe, but they also come with a form of risk. Before you select the fund look at the instruments they are investing in and assess the risk. Also, look for the details of the money and check the risk they expect from investing in the instruments they have chosen.

Check the Sharpe ratio of the fund. The Sharpe ratio helps you understand the returns of an investment as compared to the risk. A high Sharpe ratio indicates good returns, given the risk.

Minimum investment

Most money markets have a Ksh 2,500 as the minimum investment. Check how much you will need to invest in the money markets.

Regulatory requirements

Make sure the fund is fully licensed and regulated by the capital market authority. Make sure the money market you choose to invest in is regulated and there is an oversight authority.

Access of money

Confirm how easily you can get your money and whether there are penalties should you want to withdraw your money. Most money markets will give you access to your money in 24-48hours (either T+1 or T+2)

 Auditors, custodians, and trustee

As per the regulations by the capital market authority every money market fund should have an independent auditor, custodian, and trustee. If a fund does not have the three then, that is a red flag.

A money market custodian is a company trusted to hold and safeguard the securities owned by the fund.

The trustee is the person who administers the power to manage the money

How frequently the fund compounds the interest?

Compounding interest means reinvesting the interest you earn. With compound interest, you earn interest on the principal and the interest Compounded interest earns you more money and grows your investment portfolio.

When selecting a fund, find out if they compound the interest you earn daily. It means you will more income.

Use our compounding interest calculator to see the impact of compounding interest.

The 9 best money market funds in Kenya

In this section, we review the different money market funds available in Kenya and what they offer. Remember to consider the above factors when selecting a money market fund.

  1. CIC money market fund

CIC money market fund invests in a diversified portfolio of short-term instruments. They mainly invest in the following

  • Calls and fixed deposits with financial institutions regulated by the central bank of Kenya
  • Treasury bills
  • Government securities
  • Credit rated or publicly approved commercial papers with a maximum weighted average tenure of 13 months

The main features of this money market fund are:

  • There are no initial fees
  • Annual management fees of 2 %
  • Low-risk profile
  • Minimum investment of Ksh 5,000,000
  • The minimum additional investment of Ksh 1000,000
  • Interest income is credited daily and credited at the end of the month
  • The effective annual yield of 8.86%
  • Regulated by CMA

What stands out: It’s one of the largest overall money market funds with a market share of 41.4%.

2.Sanlam money market fund

Sanlam invests in cash and bank deposits, treasury bills, and corporate bonds, among others. The main features of Sanlam money markets are as follows

  • Minimum investment of Ksh 2500
  • Monthly income distribution
  • Annual management fees of 1.2% 
  • The 12-month total expense ratio of 1.7%
  • Gross yield ratio of approximately 0.9 and 11.3 yearly yield
  • Regulated by CMA
  • No maximum investment
  • Conservative risk profile

3. Zimele money market fund

Zimele money market fund is one of the most flexible money markets available as you can deposit a minimum amount of Ksh 100. The fund managers in Zimele invest in treasury bills, and treasury bonds, among others. Here are the main features of the money market fund

  • Minimum deposit of Ksh 100
  • Interest is earned daily and compounded annually
  • Zero initial fees
  • No maximum on how much you can add
  • Management fees at 2%
  • Regulated by the capital market Authority

4.Madison Money markets

The madison money market fund allows you to earn an income as you seek to achieve financial goals. Madison money market funds invest in short-term debt securities such as treasury bills, corporate bonds and fixed and call deposits. The main features of the fund are as follows

  • No entry or exit fees
  • High liquidity. You can withdraw the funds in 2 or 3 working days
  • Daily yield of 8.67% and an effective annual yield of 9.15%
  • Monthly compounded interest
  • Minimum investment amount of Ksh 5000 with no maximum amounts
  • Top up your investment with as little as Ksh 1000
  • Management fees of
  • Regulated by the capital market authority

5.NCBA Money Market fund

The NCBA money markets funds invest in instruments such as treasury notes and bills, loans to other banks as well as certificates of deposits. NCBA allows you to choose your most preferred investment currency. Here are the main features of the fund

  • Minimum investment of Ksh 5000 and USD 100
  • Regulated by capital market authority
  • Daily yield of 8.85% and an effective annual yield of 9.21%
  • Interest income is calculated daily and credited monthly
  • Access your money in T+1 days
  • Initial investment set-up of Ksh 5000 and USD 100
  • Management fees of 2% for the Kenya shilling money market account and 1% for the USD money market account.

6.Britam money market fund

Britam invests in short-term deposits such as treasury bills, treasury bonds, commercial papers, and bank deposits of less than 12 months. It’s ideal if you have a short-term savings goal. The main features of this fund are below.

  • Management fees of 2.5%
  • Minimum investment amount of Ksh 1000 and USD 100
  • Daily yield of 8.16% and an effective annual yield of 8.47%
  • Regulated by capital market authority
  • Withdraw your money in 48 hours
  • No initial fee

7. Cytonn money market fund

Cytonn money market fund invests in short-term debt securities such as treasury bills and commercial papers. It offers one of the best returns. The main features of the fund are

  • Zero initial fees
  • Management fees of 1.5%
  • Minimum investment of Ksh 1000 and a minimum top of Ksh 1000
  • Daily yield of 10% and an annualized return of 10.5%

8.Gencap Hela Imara money market fund

The Genghis capital Hela Imara money market fund offers a competitive rate.

The fund invest in the following instruments:

  • Corporate bonds
  • Commercial paper
  • Government bonds
  • Fixed deposits
  • Cash and call deposit

Here are the main features of this fund

  • Withdraw in 2-4 days
  • Minimum investment of Ksh 500
  • 2% management fees
  • Daily yield of 7.4% and an annual effective yield of 8.69 %
  • Zero initial fees
  • Minimum top-up of Ksh 500

9. Old Mutual money market fund

The fund invests in securities such as fixed deposits, treasury bills, cash, fixed deposit, and corporate with less than 12-month maturity. The main features of the fund are

  • Zero initial fees
  • Minimum investment of Ksh 1000 and a minimum top of Ksh 100
  • Regulated by the capital market authority
  • Daily yield of 7.02% and annualized yield of 7,25%
  • Management fees 2%

Summary of the top 9 Best money markets funds

In conclusion

There are many money market funds in Kenya, but not all of them are created equal. Make sure you read the money market funds minimum disclosure document before deciding on the fund of choice. It gives you more current information on the fund.

 We have done our research and compiled a list of the best money market funds in Kenya, based on factors like performance, fees, and minimum investment requirements. Whatever your financial goals may be, one of these money market funds is sure to suit your needs. Go and open a money market account in your preferred fund and earn that passive income.

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