Investing in Money Market Funds

Investing in money market funds has been a buzz on social media sites for a while now. I am sure by now you’ve seen or heard of it, with investment firms like Cyntonn, Britam, CIC among others encouraging followers to sign up now and then.


So, what are money market funds, and how do you choose the best investment firm to invest with? I will explain that in a bit, plus my experience with the Britam money market fund.


What is a Money Market Fund and how Does it Work? 

This is a type of open-ended mutual fund that invests in near-short-term and highly liquid instruments with maturities of less than one year. This includes instruments like short-term government securities (Treasury Bills), commercial papers, and cash & equivalents. 


Learn more in a related post: Mutual Funds: The Basics and How they Work


A money market fund is an investment avenue that offers one a low-risk investment opportunity, making them ideal for building an emergency fund or short-term savings.


If you need to save money for short-term goals like school fees, vacation, family & home projects, and such, you should probably get your money out of a current bank account and let it earn some interest in a money market fund. 


Most money market funds in Kenya pay an interest of 4% – 10% per annum, depending on the fund’s performance. The funds earn compounding interest so that you will be earning interest from your principal amount and the accumulated interest. While a money market fund is liquid, you still need to give a notice of 3 to 5 days (depending on the provider) to withdraw your money.


How to Choose the Best Money Market Fund in Kenya

When choosing an investment firm to invest with, consider the below:


1. Interest 

While we all aim to earn a high return from our investments (most of us, I believe), don’t just put your money in a fund that promises you the highest returns. If a fund is offering you a return that’s higher than the average market return with a significant margin, then take it with a pinch of salt.


For instance, if most funds in the market are offering a net return of 8% and firm D is giving you a net return of $13%, dig deeper. Why? Because the firm could be using an aggressive investment strategy, which involves taking higher risks for higher returns. This could put your entire investment at high risk. You need to know why the firm is making more returns – what assets is it investing in, and what is the track record of the fund and its managers?


2. Withdrawal Limitations & Terms

How liquid is the fund? If you wanted to withdraw your money, is the whole process bureaucratic, and how long does it take to get your money? I have seen most funds promising access to your money within 3-5 business days, but the shorter the fund’s withdrawal period, the better for you. 


3. Management Fees

This is very IMPORTANT, as it determines your net return. High management fees eat into your investment. In the long term, the small difference you might have between firms accumulates to make a significant loss.  


For instance, if fund A is promising a gross return of 10% and has management fees of 3% while fund B has the same gross return but a management fee of 2%, then fund B offers you a greater return. The net return on fund A is 7%, while that of fund B is 8%. 


4. Minimum Investment Amount

This is the lowest amount of money you need to open an account. It depends on the firm, but I have seen most funds are making it possible for low-income earners to invest. With most funds in Kenya, you can start as low as Ksh. 2,000.00 and work your way upwards with regular top-ups.  


5. Accessibility 

I believe in a world that is becoming digital with every passing second, and digital accessibility is paramount when it comes to the management of your investments. So, does the fund offer you a digital platform where you can always access your investment account?


Do they have an app or an online platform where you can easily log in and extract your statement? Are you able to top up or withdraw your funds from the mobile banking platform?


6. The Firm’s History

Does the firm have any history, or was it just founded, and there is no much information about it? Invest in a firm whose track record is solid. Also, ensure the firm offers you guaranteed protection of your principal amount.


7. Licensing 

Does the fund carry a license from the industry regulator, Capital Markets Authority (CMA)? A licensed fund offers you some level of protection. The regulator, CMA in this case, oversees the funds operations to ensure it invests your money in line with the stipulated guidelines and regulations. 


You can access the list of licensees from here. Check out the collective investment schemes where they list firms with their respective approved funds. For example, the approved British-American Unit Trust Scheme on that list includes a money market fund, income fund, a balanced fund, an equity fund, and a managed retirement fund. (I am using this since I have used the firm for my money market fund investments).


8. Trustees Oversight & Custodian Bank

In addition to having a license from the industry regulator, ensure that the fund has a trustee oversight and a custodian bank. Trustees oversee the operations of the fund to ensure the interests of the investors while custodian banks ensure the safekeeping of the fund’s cash amounts, title documents, and settle trade transactions from the fund manager.


Learn more in a related post: How to Choose an Investment Company


My Experience With Britam Money Market Fund

I just started investing with the Britam money market fund. It’s been over a month, actually, and my only regret is that I did not start sooner. This is not a paid ad but my genuine experience with the fund so far. 


Here’s the thing, I have meant to invest in money market funds since 2019 (I tend to procrastinate a lot on money matters) but my savings always ends up in a Sacco account. And some months back as I was getting my finances in order, I decided not to put all my savings in a Sacco account. 


I had some cash sitting in a current bank account, which was mostly part of my emergency kitty. That money has been sitting in a bank account, earning no interest. So I decided to split it and put most of it in a money market fund.


My choice was the Britam money market fund because it has an excellent track record and good returns. I also use Britam for my retirement savings, so managing and tracking my investment portfolio would be easier. I also liked the fact that your capital is fully protected. 


Opening an account is relatively easy. You can use the USSD or sign up through the online portal or mobile app, which is available on Android and iOS platforms. You can start with as low as 1,000.00 and withdraw your money within 48 hours using Mpesa or a bank. 


The app is also easy to use, and you can top up directly from there without going to the Mpesa menu. The fund’s average return ranges between 9.00% and 9.50%, and the management fee is 2.5% per annum. The fees, though, is what I find a bit high since other funds like Zimele money market fund and CIC money market fund charge 2.00% per annum. 


To open an account, you will need your ID number and KRA PIN. My financial advisor recommended using the USSD platform to sign up. After that, I received an email with the contract, and I could access the account from their app. Every top-up I do in that account is followed by an email from the fund with a contact note showing my account number, investment amount, and date.


The bottom line is, do not let your money sit in a current bank account without earning any interest. Let your money work for you, and money market funds are a great investment avenue for the risk-averse and your short-term goals. 


In this short period, I have had my money market fund investment; my money has grown by about Ksh. 500.00. It is a small amount for now, but if I do not withdraw the money in a year, that’s more than what the bank would have offered in the same period. Imagine how much that emergency kitty will grow if I do not touch it for over a year. 

Disclosure: The information provided to my readers is genuine and precise to the best of my knowledge. The links provided in this article do not belong to any affiliate partners and I am not paid for them.


  • December 19, 2020

    Thanks for this. It’s an eye-opener. keep it up. I intend to get into this – and I’ll be seeking you out for a more articulate analysis…..


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