List Of Factors To Consider Before Saving In Kenya's 42 Licensed Money Market Funds

• Unit Trusts, commonly known as Money Market Funds (MMF), have recently gained traction among many Kenyans who are stashing money in them
• Co-operatives and MSME Development Cabinet Secretary (CS) Wycliffe Oparanya recommended MMF to SACCOs for higher returns of members' deposits
• However, according to financial experts, investors need to conduct research before investing their money in MMF
• Speaking exclusively to TUKO.co.ke, financial expert Franklin Waruhiu recommended knowing the financial strength of MMF managers or trustees before saving with them

TUKO.co.ke journalist Wycliffe Musalia has over five years of experience in financial, business, and technology reporting and offers deep insights into Kenyan and global economic trends.

Are you thinking of saving your money in a Unit Trust or Money Market Fund (MMF) for better returns?

MMF investments earn compound interest, and you can access your money at any time.

Why MMF is becoming common among Kenyans

According to the Capital Markets Authority (CMA), there are 42 licensed money market fund trustees in Kenya.

The Unit Trust has recently gained popularity among Kenyans, with Co-operatives and MSME Development Cabinet Secretary (CS) Wycliffe Oparanya recommending MMF savings to SACCOs.

Speaking on Thursday, September 12, during the 7th Annual Stima Sacco Delegates Conference in Nairobi, Oparanya said MMF are safe and promises higher returns to Sacco members.

"As a cooperative movement, let's think outside the box. You can also spur economic development by doing other things. I am encouraging SACCOs to invest in money market funds (MMFs).

"Invest the excess liquidity in MMFs because these are government securities and are safe. You can use the returns to pay dividends to members," said Oparanya.

What to consider before saving in MMF

In an exclusive interview with TUKO.co.ke, financial expert Franklin Waruhiu said investors should conduct research before investing in MMFs.

Waruhiu recommended knowing the financial strength of MMF managers or trustees before saving with them.

"We usually say if you do not understand where they are making money from, or their financial stability, then you are the product," explained Waruhiu.

Waruhiu highlighted the factors investors should consider before saving money in Unit Trusts.

These are:

1. Assets Under Management.

Investors should find out the asset of the unit trust they want to invest in. For instance, as of March 2024, the CIC Unit Trust Scheme has the highest Assets Under Management of KSh 61.92 billion.

Other MMFs with the highest assets above KSh 5 billion include Madison, Coop Bank, ABSA, Sanlam, and NCBA.

2. Management fee

Waruhiu recommended a Money Market Fund with the lowest management fee to the industry average of 2%.

"A high management fee is not good for your investment because it will eat into your returns," he said.

3. Investment return

MMFs with investment returns of at least 8% are good compared to high returns, which could be prone to risks.

4. Minimum deposit

The monthly deposit required for a money market fund should fit your budget.

There are Unit Trusts that have a minimum deposit of KSh 100 and range to KSh 5,000.

5. Custodian

The financial strength of the custodian holding the money market fund funds is also a key factor to consider.

An MMF with a Top-Tier 1 bank as its custodian could be considered a safer investment.

6. Track record

The track record of the trustee and the fund major is important.

The financial expert warned against trusts where Kenyans lost money and don't have consistent returns.

MMF with minimum deposit of KSH 1000

Money market funds (MMFs) specialise in short-term, low-risk debt securities, providing investors with a stable option for saving money and achieving modest returns.

These funds are offered by various institutions, including investment companies, banks, and brokerage firms, with both Kenya shilling and dollar-denominated options available

There are those that set initial investments and subsequent top-ups as low as KSh 100, while others require a minimum deposit of KSh 1,000.

Proofreading by Otukho Jackson, a multimedia journalist and copy editor at TUKO.co.ke