Money Market Fund In Kenya: A Beginner Understanding

When referring to Money Market Fund in Kenya, it is the idea of investing your money under the Collective Investment Scheme.

Collective Investment Scheme is the accumulation of funds from different people who in this case are known as investors who have a common goal or objective with the aim of making a profit, increasing income, and buying properties among others. The money accumulated is put into use to generate more money. It is invested in various areas or fields.

Collective Investment Scheme is divided into two types:

1. Mutual funds
2. Unit trusts.

Mutual funds are the accumulated money collected from many investors, and it is governed by the Company Act. Mutual funds are not so common in Kenya, hence fewer chances of coming across them.

Unit trusts are the accumulated money from different investors and it is governed by a Trustee Act, and you are most likely to have encountered them.

Both Mutual funds and Unit trusts just operate the same way. But you receive funds when you invest in Mutual funds while you receive units when you invest in Unit trusts.

This article focuses on Unit trusts, which are common in Kenya. This is where I will exhaust the Money Market Fund (MMF) in Kenya. Unit trusts are divided into; Money Market Fund, Equity Funds, Bond/Fixed Income Funds, and Balanced Fund.

Equity Funds are basically investing in shares, bonds or fixed-income funds is basically investing in government bonds, and balanced funds are investing in both shares and bonds. 

Money Market Fund in Kenya is the common and most offered type of Unit Trust in Kenya. It is a form of collective investment scheme managed by a qualified money manager who then invests the money collected into three assets commonly known as Money Market Instruments.

These Money Market Fund in Kenya Instruments include:

Treasury Bills 

This is when the government borrows money from the public. So the qualified money manager will invest some of the accumulated money by loaning the government.

Commercial Paper

This is money issued to corporations to help finance their short-term cash flow needs, and hence, the qualified money manager considers this a good way to invest.

Fixed Deposits

These are deposits made to commercial banks.

Note:

1. The three Money Market Fund in Kenya Instruments are all short-term investment instruments. But now you have to imagine Money Market Fund in Kenya as a full cake, which contains commercial paper, fixed deposit, and treasury bills. So, when you own a unit or units in the Money Market Fund, it means you own a piece of the cake and you will be referred to as a Unitholder.
2. In Kenya since the MMF is under the Company Act, these companies are managed and regulated by the Capital Market Authority (CMA), which is referred to as Qualified Money Manager.
3. The CMA has rules and regulations that govern the companies involved in collecting money from different people whom they refer to as investors.

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