Why investing in Money Market Funds is the Right Choice

By Dennis Maranga;

Running a business can be challenging owing to economic factors that impact the growth and stability of any profit making venture. Uniquely, the economic environment in Kenya is full of opportunities in the midst of challenges. With inflation rates (and subsequently the cost of living) on the rise, it is crucial to not only make informed financial decisions but also prepare business owners and employees on financial planning.
So, where are savvy Kenyans putting their money amidst these economic uncertainties?
Recent data from the Capital Markets Authority (CMA) reveals a significant trend. As of March 2024, Kenyans had invested Ksh 225.4 billion in Collective Investment Schemes (CISs) with 66% (KSh 148.6 billion) of these funds having been invested in Money Market Funds (MMFs). This significant preference highlights the appeal of MMFs as a stable and straightforward investment choice for those seeking a balance between risk and return.

Why are Money Market Funds attractive?
Traditionally, we have relied on fixed deposits, savings accounts, SACCOs, and chamas for our savings. While these investment options are understood, provide some security and ease in investing and withdrawing; their returns are often undermined by the low bargaining power (in getting higher returns) of individual investors and the rising cost of living, eroding the real value of your savings and investments.

Money market funds therefore present a compelling alternative for those looking to preserve and grow their wealth in the long term. These funds are invested in low-risk securities, which helps in mitigating capital losses whilst offering a high degree of liquidity and stable returns.
Moreover, money market funds are invested in a mix of government and corporate debt securities as well as bank deposits, typically outpacing inflation, providing a better chance of capital preservation.

Transparency and regulatory oversight are additional advantages of money market funds in Kenya. The CMA regulates CIC Asset Management and this entails providing monthly, quarterly and annual reports to the regulator who ensures compliance to the law. To add another layer of comfort, the CIC Money Market Fund is administered by an independent trustee, audited by an independent firm and all client funds are held in custody by a custodial bank.

Lastly, MMFs offer liquidity and accessibility, allowing you to withdraw funds on short notice. This feature is particularly beneficial for both short-term and long-term financial goals.For instance, investing in CIC Asset Management’s MMF starts from as low as KSh 5,000, offering flexibility and quick access to funds when needed.

What else we offer;
While MMFs are a popular choice, CIC Asset Management offers a wider range of investment options to suit various risk appetites and financial goals:
●CIC Wealth Fund: A low to moderate-risk fund like an MMF, investing in diversified near-cash holdings, fixed deposits, and high-yielding interest-bearing options.
●CIC Dollar Fund: A low to moderate-risk fund specifically designed for US dollar investments, focusing on cash, near cash, fixed deposits, and bonds denominated in USD.
●CIC Fixed Income Fund: For investors seeking long-term capital growth, this fund invests in long-term fixed-income instruments like government bonds.
●CIC Balanced Fund: A long-term investment option with a balanced portfolio of equities and fixed-income instruments, offering a mix of growth and stability.
●CIC Equity Fund: Ideal for long-term capital growth, this fund invests directly in equities listed on the Nairobi Securities Exchange (NSE).
It is important to note that while money market funds may not offer the same high returns as riskier investments like stocks or real estate, they provide stability, liquidity, and a reasonable return on investment over time. MMFs are designed to preserve capital and potentially outpace inflation, all while keeping money readily accessible.

As we navigate economic challenges, money market funds offer a practical way to secure financial stability. By diversifying savings and investment strategies with MMFs, you can take a proactive step toward financial freedom in increasingly volatile economic landscapes.