This archive report was first published on 24 September 2019.
Kenya's money market funds have experienced a surge in popularity, with growth rates surpassing those of bank deposits in the first half of 2019.
According to the latest data, the total assets under management held by money market fund managers grew at an annualized rate of 23.2% to KSh 56.5 billion from KSh 50.6 billion recorded during the same period in 2018.
Cytonn Money Market Fund recorded the strongest annualized growth of 764.2% to KSh 302.6 million from KSh 62.8 million in financial year 2019.
However, CIC Asset Management remained the largest overall money market fund manager with a market share of 41.4% in the period under review, up from 39.0% in FY'2018.
Equity Investment Bank's money market fund, on the other hand, recorded the highest decline of 51.0% (annualized) to KSh 480.3 million in the first half of 2019 from KSh 644.5 million in FY'2018.
The removal of the deposit rate cap floor in August 2018 by the National Assembly, which initially required banks to pay at least 70.0% of the Central Bank Rate (CBR) base rate on deposits, is attributed to the faster growth of money market funds relative to bank deposits.
Money market funds offer attractive yields to investors due to their diversified asset allocation and active management, ensuring that asset classes with the highest returns are invested in.
These funds are invested in liquid interest-bearing securities with a weighted average maturity of less than 12 months, including bank deposits and other short-term money market instruments.
Money market funds are best suited for investors who require a low-risk investment that offers capital stability, liquidity, and a high-income yield.
