Money Market Funds: Top 5 Money Market Funds in Kenya

By Macharia

What is a Money Market Fund

A money market fund primarily invests in good credit quality short-term debt instruments including treasury bills and commercial paper. This fund is perfect for the cautious, low-risk investor who prefers consistency and security for their investment funds. Daily calculations determine interest, which is then netted off to credit the client’s account.

Money Market Funds (MMF) and Money Market Accounts (MMA)

A Money Market Fund (MMF) and a Money Market Account (MMA) are not the same things, despite their names being similar. An investment that is supported by an investment fund firm is known as a money market fund. As a result, there is no leading assurance. An interest-bearing savings account is referred to as a money market account. Financial organizations provide money market accounts. They usually have few transaction rights and are guaranteed by the Kenya Deposit Insurance Corporation.

How a Money Market Fund Works

Money market funds function like traditional mutual funds. They must follow the guidelines set by financial regulators and provide redeemable units or shares to investors (for example, those set by the Nairobi Securities Exchange.

Money market funds can invest in the following types of debt-based financial products:

  • Bankers’ Acceptances (BA) are short-term loans that a commercial bank guarantees.
  • Certificates of Deposit (CDs): Short-term savings certificates issued by banks
  • Unsecured short-term business debt under the commercial paper
  • Repurchase contracts (Repo)
  • Short-term debt obligations
  • Short-term government debt involving Kenyan Treasury Bills

Since the returns from these instruments are based on the current market interest rates, interest rates also affect the total returns from money market funds.

Money Market Funds In Kenya

Most Money Market Funds in Kenya offer mobile apps and web-based applications that enable you to sign up and start investing in MMFs. They offer a different range of initial deposits from as low as Kshs 100 and give you the freedom to top up your investment at any given time.

With that said, here are the top 5 MMFs in Kenya

1. Madison MMF 

At Madison MMF you require an initial investment amount of Ksh 5,000 with no maximum limit. You can top up with as little as Ksh 1,000 whenever you have additional cash and they provide free monthly statements while withdrawals processed within 2 working days.

The current annual yield is 9.62% p.a

2. CytonnInvest MMF 

At Cytonn there is an annual management fee of 1.5% p.a. A minimum investment of Ksh 100 and no minimum top-up. Cytonn allows deposits via MPESA and one can withdraw or invest up to a max of Kshs 300,000

The current annual yield is 11% p.a.

3. Genghis Capital MMF

At Genghis Capital, the minimum investment amount is Ksh 500 while the minimum top-up is Ksh 500. You can access your money within 2-4 working days. There is an annual management fee of 2%. Easily sign-up via the G-Kuze app.

The current annual yield is 9.5% p.a

4. Britam MMF 

The minimum investment at Britam MMF is Ksh 1,000, and a minimum top-up of Ksh 100 with an annual Management fee of 2.5% Britam allows deposits/withdrawals via Mpesa and one free withdrawal every month. 

The current annual yield is 8-10% p.a

5. UAP Old Mutual MMF  

 The minimum investment at UAP MMF is Ksh 1,000. With UAP you can use your investment portfolio to secure a loan. Top up with at least Ksh 1,000 per month with no restrictions to the maximum contributions. UAP allows one free withdrawal every month. UAP also supports MPESA transactions

The current annual yield is 9.62% p.a

Advantages and Disadvantages of Money Market Funds

Similar investing choices to money market funds include bank money market accounts, ultrashort bond funds, and enhanced cash funds. These investment alternatives may seek bigger returns while investing in a larger range of assets.

A money market fund’s main goal is to give investors a secure means of making modest investments in highly liquid, debt-based securities that are safe and secure. Money market funds are classified as low-risk, low-return investments in the world of mutual fund-like products.

In the near term, many investors prefer to put substantial sums of money into these funds. Money market funds, however, are not appropriate for long-term investing objectives like retirement planning. This is because they don’t give substantial capital growth.

Investors find money market funds to be appealing since there are no burdens attached—neither entry nor exit fees. Many funds also offer tax-advantaged profits to investors by purchasing municipal securities that are free from federal income tax (and in some instances at the state level, too).

Final Word

An active investor who has the time and knowledge to scout for the finest short-term debt instruments—offering the best interest rates at their selected levels of risk—may want to invest independently in the many available products. On the other side, a less experienced investor would like to use money market funds and hand off the responsibility for money management to the fund managers.

Although fund shareholders normally have unlimited access to their funds, there may be a cap on the number of withdrawals they may make in a given time frame.

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