If you want to create a passive income in Kenya, a money market fund is a good investment to consider. There are various money market funds in Kenya, each offering a different rate of return.
A money market fund (MMF) is a type of mutual fund that invests in short-term, highly liquid, and low-risk securities. This investment provides investors with a safe place to invest easily accessible, cash-equivalent assets.
Money market funds are ideal for investors looking for a low-risk investment with stable income and capital preservation.
Key Features of Money Market Funds in Kenya
Short-Term Investments
Money market funds invest in instruments with short maturities, typically less than a year. Common investments include treasury bills, commercial paper, and certificates of deposit.
Liquidity
MMFs are highly liquid, allowing investors to access their money relatively quickly, usually within a few hours or days. You don’t have to wait for months to access your money.
Low risk
The investments made by money market funds are low risk. This is because they invest in government securities and high-quality corporate debt, which are less likely to default.
Interest earnings
While the returns are not as high as more aggressive and high-risk investment options, money market funds typically offer better returns than regular savings accounts.
Professionally managed
These funds are managed by professional fund managers who aim to maintain the fund’s net asset value (NAV) and provide a stable income. As an investor, you won’t be required to decide how your money is invested—the fund managers do the heavy lifting.
Low Requirements
Money market funds in Kenya are accessible to individual and institutional investors, often with relatively low minimum investment requirements.
How Money Market Funds Are Regulated in Kenya
The Capital Markets Authority (CMA) is the regulatory body that oversees money market funds in Kenya. CMA ensures that money market funds comply with the legal framework in Kenya to protect investors.
Other investments regulated by CMA include treasury bonds, certificates of deposit, and commercial paper.
Additionally, money market funds are subject to income taxes levied by the Kenya Revenue Authority (KRA). As of 2024, MMFs are subject to a 15% withholding tax, which is remitted to the tax authority annually.
Best Money Market Funds in Kenya
Several financial institutions and fund managers offer money market funds in Kenya, including:
Sanlam Money Market Fund
The Sanlam Money Market Fund is a product of Sanlam Investments East Africa Ltd. The interest for this money market is calculated daily and compounded monthly. It has recorded an average yield of 11.13%.
This MMF requires a minimum investment amount of Ksh.2,500, and subsequent top-ups must be at least Ksh.1,000. Withdrawals take 3 working days to be processed. Sanlam charges an annual management fee of 1.2%.
When you invest in the Sanlam MMF, the fund invests the money in high-quality interest-earning assets like treasury bonds and fixed deposits.
Nabo Capital Money Market Fund
Nabo Money Market Fund is a product of Nabo Capital, which has been in the market for several years. This MMF has an average daily yield of 11.09%.
The Nabo MMF requires a minimum investment amount of Ksh. 100,000, and subsequent top-ups must be at least Ksh. 10,000.
The company has a minimum lock-in period of 3 months, and withdrawals take 2 days to process. Nabo charges a 2% management fee.
CIC Money Market Fund
CIC Asset Management manages the CIC Money Market Fund, and the company became a licensed fund manager in 2011. It has an annual interest rate of 9.5%.
The CIC Asset Management has one of the highest funds under management, currently at Ksh. 53 billion.
The minimum investment amount for the CIC MMF is Ksh. 5,000, while the minimum top-up amount is Ksh. 1,000. The annual management fee is 2%. The CIC MMF calculates interest daily and credits the return at the end of the month.
It mainly invests in government bonds and other liquid instruments. Distributions are made monthly, but clients can request penalty-free withdrawals at short notice.
APA Apollo Money Market Fund
The Apollo MMF is managed by Apollo Asset Management Company Ltd and offers investors a low-risk investment with guaranteed returns. It offers an attractive daily yield of 12.52%.
The Apollo MMF has one of the lowest minimum investment amounts of Ksh. 1,000, and subsequent top-ups must be at least Ksh. 1,000. When you make a withdrawal request, you can expect the distribution to be processed within 3 working days.
This MMF invests in various low-risk investments like treasury bills, commercial paper, government bonds, fixed deposits, and corporate bonds. The company levies a 2% annual management fee.
Old Mutual Money Market Fund
UAP Old Mutual Money Market Fund is managed by Old Mutual Kenya, a financial services provider. This MMF offers an average daily yield of 11.07%.
To invest in the Old Mutual MMF, you need a minimum investment amount of Ksh.1,000, and at least Ksh.1,000 in subsequent top-ups. Investors have the freedom to switch investments between several funds. The company has a withdrawal processing period of 3 days.
Old Mutual Kenya invests the MMF funds in various low-risk investments like T-bills, corporate notes, and fixed deposits. The company charges a 2% annual management fee.
The above list comprises some of the popular money market funds in Kenya. Here is a summary of other MMFs that you can consider:
- Cytonn Money Market Fund
- Zimele Money Market Fund
- Kuza Money Market Fund
- Britam Money Market Fund
- Genghis GenCap Hela Imara Money Market Fund
- Dry Associates Money Market Fund
- NCBA Money Market Fund
- Madison Money Market Fund
- ICEA Lion Money Market Fund
- Co-op Money Market Fund
- Jubilee Money Market Fund
- Etica Money Market Fund
- Lofty-Corban KSH Money Market Fund
- Absa Shilling Fund MMF
Pros of Investing in Money Market Funds
- Safety: Due to their investment in low-risk securities, money market funds are considered safe.
- Stability: They provide stable returns, which makes them attractive for risk-averse investors.
- Easy Access: Investors can easily withdraw their money when needed.
- Professional Management: Investors benefit from the expertise of professional fund managers.
Cons
- Lower Returns: Compared to other investment options like stocks or real estate, money market funds offer lower returns.
- Inflation Risk: Returns may not always keep up with inflation, potentially eroding purchasing power over time.
Conclusion
Overall, money market funds in Kenya provide a reliable and convenient option for investors seeking stability, liquidity, and professional management of their short-term savings.