What is a Money Market Fund?
A money market fund is a low-risk mutual fund that invests only in securities that can be quickly converted to cash. These securities include cash, cash equivalent securities, and high-credit-rating, debt-based securities with a short-term maturity.
Advantages of Money Market Funds:
Here are some of the advantages of money market funds:
They are very safe
They are ideal for people who like to save money and want some return on their investment. The interest rate is usually not fixed, and the returns can be variable, depending on market conditions (but it’s still very safe).
Money market funds raise fewer risks than other types of mutual funds. That’s why they are so popular!
They are liquid and easily accessible.
It’s effortless to exchange your money for this type of investment. You can usually get the money you’ve invested at any time, and they don’t have many restrictions (if there are any).
Money market funds are also bought and sold regularly. Many people sell their fund shares readily if they need cash in a hurry or if they want to purchase other investments. This liquidity can also help you decide when to sell your fund shares if the market value drops and you need cash quickly.
They provide higher yields.
Compared to other investments, money market funds usually provide higher yields and thus more profit (depending on the institution you choose).
Tax advantages are a big plus if you’re investing in this fund for the long term.
The interest earned is not taxed until it’s withdrawn, and the amount that has to be reported annually is reduced. The earnings that appear on the investor’s tax returns are usually less than those invested in other bonds or bank accounts. This makes money market funds a great choice if you’re trying to avoid taxes.
Best Money Market Funds in Kenya
As mentioned, these are some of the best money market funds in Kenya today.
1. Zimele Money Market Fund
The Zimele fund is flexible, convenient, and allows you to save according to the pace that you choose. In other terms, it’s also called a ‘savings plan.’
Zimele pools members contributions and invests them in safe high-yielding interest-bearing assets such as Treasury bills, Treasury bonds, and fixed deposits
The Capital Market Authority (CMA) licenses and regulates Zimele.
Features and Benefits:
- You require a minimum deposit of Ksh. 100
- The fund offers competitive interest rates and enhanced generally keeps the funds safe.
- There are no hidden charges while dealing with this fund.
- You have the option of using M-Pesa for deposits (pay bill number 501101) and withdrawals.
- The interest is compounded annually.
- You can request online statements.
- No minimum balance requirement
The Zimele Savings Plan is Ideal for:
- Building up savings for emergencies.
- Building up savings for groups and investment clubs (Chamas).
- Build up savings for your children’s needs, such as education, childcare, healthcare, etc.
- You are managing your Business’s surplus funds.
- You are saving money for short-term financial needs such as holidays, household goods, etc.
- Saving for long-term goals such as weddings.
2. Sanlam Money Market Fund
The fund aims to deliver a higher income level than average banks’ fixed deposit accounts.
Sanlam, like many others, invests in money market securities, including higher-yielding
fixed and call deposits, treasury bills, and investment-grade commercial paper.
The maturity of this specific fund is usually less than one year after investing in money market instruments.
Benefits of Sanlam fund
- The fund gives higher returns as opposed to banks’ fixed deposits.
- Sanlam cautions clients against market volatility.
- The fund is advantageous if you want to save funds for an emergency later or ‘nest egg.’
3. CIC Money Market Fund
The CIC Money Market fund is a low-risk fund that invests in diversified near cash, interest-bearing instruments in the Kenyan market.
The fund invests in high-quality interest-bearing investments, fixed deposits, and near cash holdings in the Kenyan Market.
If you are an investor looking for a place to store away funds with low-risk, this is the fund for you.
Key benefits of the CIC money market fund
- Liquidity: You can withdraw your funds at short notice with no penalty fees.
- Flexibility: You can switch or transfer funds to another fund that you may have with CICAM.
- Security: The fund invests in government paper and liquid instruments.
- Competitive Returns: Interest is calculated daily and credited at the end of each month. The fund benefits from placing deposits in large sums to negotiate competitive rates.
- Professional fund management: Clients benefit from seasoned professionals with expertise in the sector.
4. Cytonn Money Market Fund
Cytonn Money Market Fund (CMMF) is your ideal investment plan if you look to save up to meet goals soon.
CMMF invests in high-quality interest-bearing investments, fixed deposits, and near cash holdings in the Kenyan market.
Features of the Cytonn fund
- If you decide to start investing in this fund, no entry or exit fee is charged.
- Your initial starting capital will remain safe.
- The rates are based on the current market; this means that they are highly competitive.
- For first-time investors, it is pretty easy to start.
5. Britam Money Market Fund in Kenya
Britam Money Market is your ideal market fund to invest cash you need to save up for short-term goals. These short-term goals may include school fees, wedding savings, construction projects, holiday planning Chama investments, car/mortgage/land deposits, and family welfare funds.
Britam’s fund requirements are pretty simple. This include
- It would be best to have a mobile phone, a national I.D. card/Passport, and Ksh 1,000 on your MPesa account to start investing.
- You will manage all account features on your phone; this includes deposits, withdrawals, and investments.
- Clients can also top up your account anytime using your MPesa account.
6. CBA Group Money Market Fund in Kenya
The CBA fund invests in fixed deposits, interest-bearing investments, and near-cash holdings in the Kenyan market.
If you are a low-risk investor, then this CBA fund is definitely for you, especially if you prefer stability and security at the same time. It is also ideal during times of stock market turbulence.
- No joining fee is required.
- Interest is calculated daily and credited to the client’s account monthly.
- To maximize investment returns, one has the option to reinvest into the fund.
- Ksh. 5,000 is the minimum investment for each CBA unit Trusts Funds.
- Ksh. 5,000 is the minimum additional investment amount.
- A service fee of 2% P.A. Applies.
Summary: Money Market Funds in Kenya
The following data was published by Business daily in October last year.
|Rank||Fund Manager||Daily Yield||Effective Annual Rate|
|1||Cytonn Money Market Fund||10.00%||10.52%|
|2||Zimele Money Market Fund||9.56%||9.91%|
|3||Sanlam Money Market Fund||8.86%||9.27%|
|4||Nabo Africa Money Market Fund||8.83%||9.23%|
|5||CIC Money Market Fund||8.71%||9.02%|
|6||Madison Money Market Fund||8.62%||9.00%|
|7||Apollo Money Market Fund||9.10%||8.95%|
|8||Dry Associates Money Market Fund||8.33%||8.65%|
|9||Co-op Money Market Fund||8.30%||8.65%|
|10||GenCapHela Imara Money Market Fund||8.19%||8.53%|
|11||British-American Money Market Fund||8.16%||8.47%|
|12||ICEA Lion Money Market Fund||8.01%||8.34%|
|13||NCBA Money Market Fund||8.02%||8.33%|
|14||Orient Kasha Money Market Fund||7.84%||8.16%|
|15||Old Mutual Money Market Fund||7.02%||7.25%|
|16||AA Kenya Shillings Fund||6.51%||6.71%|
Source: Business Daily