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Money Market Funds

• What it is: Investment funds that invest in short-term, low-risk securities
• Risk level: Low
• Typical return: 8-15% annually
• Key consideration: Not insured like bank deposits, but stable
• Real example: KSh 10,000 for one year at 9% = KSh 900 in returns (KSh 10,900 total)
• Where to get it: Banks, investment companies like Sanlam, CIC, Cytonn
• Minimum to start: Usually KSh 500-5,000

Kenya Money market visualizations: KES

Kenya Money market visualizations: USD

Financial Insights

Gross Yield vs. Actual (Net) Yield

• Headline Yield: This is like the number you see first. For example, Dry Associates advertises an impressive 16.25% return. However, this number doesn’t tell the whole story because it doesn’t account for the costs.
  
• Actual Yield: This is the real return after you pay for management fees and taxes. For Dry Associates, even though the headline is 16.25%, after costs you only actually earn 7.92%. In contrast, Madison Group shows a headline yield of 9.11% but ends up giving a net return of 10.29%—which means that once you subtract the fees and taxes, you actually come out ahead compared to some funds with higher headline yields.
  

Understanding the Fees

• Management Fees: Every fund charges a fee for managing your investment. These fees can range from no fee at all, like Equity Bank (0.00%), to as high as 2.53% with Dry Associates. Even if a fund doesn’t charge a fee, like Equity Bank, you might still get a net yield of 9.10%, which isn’t the highest on the list. This shows that many factors, not just fees, influence your final earnings.
  

Minimum Investment Amounts

• Accessibility of Funds: Each fund has a different minimum amount you must invest. For instance, ICEA Lion lets you start with as little as Ksh500, and APA Apollo requires just Ksh1,000. This makes them accessible if you’re just starting out. On the other hand, Dry Associates asks for a hefty minimum of Ksh1,000,000, which is more suited for larger or institutional investors. So, while a fund might offer a certain return, the amount you need to invest can also determine whether it’s a good fit for you.
  

Comparing All the Funds

• Madison Group’s Fund shows a headline yield of 9.11% but after fees and taxes, you end up with a net yield of 10.29%. This is the highest net yield among the funds, making it very appealing if you want to maximize your actual earnings.
  
• APA Apollo’s Fund offers an 11.70% headline yield and delivers a net yield of 9.95%. Similarly, Old Mutual Kenya’s Fund has a headline yield of 12.54% and a net yield of 9.84%. Both are strong performers, even though their headline numbers are a bit higher than Madison Group’s.
  
• Other funds like Kuza Asset Management and Sanlam Group offer headline yields of around 14.89% and 14.90% respectively, but their net yields drop to 9.64% and 9.35%. This shows that higher headline yields can be diminished by fees.
  
• Equity Bank’s Fund, with a headline yield of 12.23% and no management fee, still delivers a net yield of 9.10%, indicating that performance isn’t just about fee size.
  
• Meanwhile, funds like CIC Group and KCB provide net yields of 8.65%, and Nabo Capital’s Fund shows a net yield of 8.59%. ICEA Lion’s Fund gives a net yield of 8.16%. These returns are decent but not as attractive when compared with the best performers.
  
• Dry Associates, despite its high headline return of 16.25%, ends up with a net yield of 7.92% because of higher fees and the large minimum investment of Ksh1,000,000.
  
• Finally, Cytonn Asset Managers Limited’s Fund and Britam’s Fund show net yields of 7.73% and 6.75% respectively, meaning that after all costs, you would earn less compared to the top performers.
  

What Does This Mean for Everyday Investors?

1. Don’t Judge by the Headline Alone:
   Just as you wouldn’t judge a product solely by its packaging, don’t rely only on the headline yield. The net yield—the amount that ends up in your pocket—is what really matters.
   
2. Fees Matter:
   Even small differences in management fees can greatly affect your earnings over time. A fund with a lower fee might deliver a better net yield even if its headline return seems lower.
   
3. Consider How Much You Can Invest:
   If you’re just starting out or don’t have a lot of money to invest, funds like ICEA Lion or APA Apollo, which require a small initial investment, may be more accessible. However, funds that require a high minimum investment, like Dry Associates, are typically geared toward larger investors and come with different cost structures.
   
4. Look for the Best Value:
   For someone aiming to maximize the actual return on their money, Madison Group’s fund stands out with a net yield of 10.29%. Other solid choices include APA Apollo (net yield of 9.95%) and Old Mutual Kenya (net yield of 9.84%). On the other hand, funds like Britam, with a net yield of just 6.75%, might be less attractive if you want the highest return after costs.
   

Final Thoughts

In summary, when choosing a money market fund, it’s essential to look past the initial, flashy headline return. Instead, focus on the net yield—the real return you’ll receive after fees and taxes. Consider the cost of managing your money, the amount you need to invest, and how these factors combine to determine your final earnings. With this understanding, you can make a more informed decision that ensures you’re getting the best value for your money.