Investors have placed 74.7 percent of their funds in money market funds which has emerged as the most popular ahead of others like equity funds that invest in listed stocks.
The dominance of money market funds – which primarily invest in fixed bank deposits besides holding cash— is due to their more stable returns that hover around 10 percent per annum.
According to data from the Capital Markets Authority (CMA), money market funds held Sh131.5 billion in assets, making up nearly three-quarters of Sh175.9 billion in total assets.
A further analysis of the CMA data shows money market funds are mostly invested in cash, demand deposits and fixed deposits.
Investing in the cash and near cash instruments is beneficial to both investors in the money market funds and the fund managers where the latter earns a fixed return from the pooled investments for distribution to clients.
On the flipside, clients can have access to liquidity from money market funds on short notice based on their investments in highly liquid assets with demand and term deposits being relatively easier to convert into cash.
Funds invested in fixed income meanwhile only represent a 17.1 percent market share or Sh30.1 billion as of June with the investment class largely focused on debt securities issued by the government.
Equity funds hold a lesser Sh2.6 billion in assets by unit trusts, representing two percent of the market, with the modest holdings largely attributable to investors shunning the local stock market owing to the continued dismal performance of the bourse.
On their part, balanced funds held assets valued at Sh1.7 billion or one percent of total holdings, with the funds splitting placements across various asset classes including cash, fixed income and equities.
As of June, unit trusts held a further Sh9.8 billion in other types of funds such as managed funds, enhanced high-yield funds, dollar and growth funds.
