Money market funds have emerged as the favoured choice of investors in the country capturing a substantial 74.7% of their investments.
This dominance is attributed to their reliability, with returns typically averaging around 10.0% per annum. Data from the Capital Markets Authority (CMA) reveals that money market funds hold assets totaling Kshs 131.5 bn, accounting for almost 75.0% of the total market assets which stood at Kshs 175.9 bn.
A deeper dive into the CMA data reveals that money market funds primarily allocated their investments to cash, demand deposits, and fixed deposits with fixed deposits taking the largest share of the total assets at 44.0% equivalent to Kshs 78.1 bn. This strategy benefits both investors and fund managers alike.
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Investors appreciate the liquidity of these assets, allowing for swift access to their funds when needed. Fund managers, on the other hand, enjoy the security of a fixed return from the pooled investments, which they can distribute to clients.
Conversely, the fixed income market commands a 17.1% market share, equivalent to Kshs 30.1 billion as of June 2023. This segment predominantly centres its investments on government-issued debt securities. Equity funds, investing in listed stocks, hold a comparatively smaller share of the market, with assets totaling Kshs 2.6 billion, representing just 2.0% of the total assets.
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The subdued interest in local stock markets can be attributed to the persistently deteriorating performance of the equities market in Kenya. Balanced funds occupy a modest position, with assets valued at Kshs 1.7 billion, constituting 1.0% of the total holdings. These funds employ a diversified approach across various asset classes, including cash, fixed income, and equities.
Furthermore, unit trusts oversee an additional Kshs 9.8 billion in other fund types, such as managed funds, enhanced high-yield funds, dollar-denominated funds, and growth funds. In a nutshell, money market funds enjoy significant favour among investors due to their stability, holding the lion’s share of investments. Fixed income investments, equity funds, and balanced funds have smaller market shares, with stock market performance influencing investor sentiment.
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