Africa-Press – Kenya. A challenging macro-economic environment is pushing more Kenyans into Short term investment schemes that guarantees quick returns with low risks, industry players have revealed.
There has been an upsurge in the short maturity period schemes like the money markets, typically ranging from a few days to one year, which helps maintain liquidity and reduces the risk of interest rate fluctuations in periods such as now, characterised with market volatility.
Portfolio manager at CIC asset management Muthoni Muuo, says the fund is a preferred venture in the current market that has seen some investors lose money from other long term investment portfolios.
“They are designed to provide investors with a relatively safe place to park their cash while earning a modest return that is generally higher than traditional savings accounts,” Muuo says.
Typically, money market fund is a formalised and regulated ‘chama’, where individuals can park their cash while earning a modest return within a short period of time.
For instance, if an individual has Sh200,000 set aside for emergencies. Therefore, she decides to deposit the sum in a money market account, she can withdraw the amount whenever she needs it.
In addition, the person would receive higher interest compared to a savings account.
“It further guarantees more safety and stability. If your primary concern is capital preservation and you prioritise safety over high returns, money market funds can be a reliable option. They offer stability and are less prone to market fluctuations compared to riskier investments, making them a suitable choice for conservative investors,” adds Muuo.
Money markets have an initial minimum investment amount requirement of even less than Sh1,000, with an average annual interest rate of about 10 per cent.
They invest in various assets such as government securities, high-quality commercial paper, bank deposits, treasury bills and cash holdings, all strategically invested within the country’s financial market.
Further reasons why potential customers should venture into money markets according to Muuo, is the funds diversification and risk mitigation aspect.
She says including money market funds in ones portfolio can add diversity, balancing higher-risk investments like stocks and bonds.
“They act as a stabilizing element, especially during volatile market conditions, and can help mitigate risk in ones overall investment strategy,” she says.
However, she notes that the investment portfolio is neither immune to challenges, as it is also prone to credit risks at the point of making an investment.
To avert this, CIC says as a fund, it conducts thorough research on all investments to ensure they are of investment grade thereby reducing risks.
They also employ the diversification strategy in tacking this risk.
She acknowledges the integration of technology and online platforms in the trading today, as it has significantly enhanced accessibility, ease of management and overall user experience for investors interested in money market funds.
‘It has transformed the way people engage with these investment vehicles, making them more user-friendly, accessible and transparent,” she adds.
“As CIC, we have invested in the CIC Asset app or the CIC Asset portal that gives our customers the convenience to invest and access their funds on the go.”
Among the latest trends driving the market, Muuo says there is continued attention and growth in money market funds with citizens becoming more aware about the benefits of such investment opportunities.
“People are intentional about the need to have emergency funds and saving towards their goals such as travel, education, home acquisition using MMFs. Returns from MMFs have increased in the recent past to reflect the economic environment.”
For More News And Analysis About Kenya Follow Africa-Press
