Money market fund returns fall to 9.3% as investors shift to special funds

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Kenyans saving in money market funds are earning less than they did a year ago. The average return across 26 funds was 9.3% a year after fees as of October 15, down from 9.9% at the same point in 2025, Business Daily reported.

Twenty of the 26 funds tracked posted lower returns. Six went the other way: African Alliance Kenya, Faulu, Genghis, KCB, Madison and Sanlam Allianz. The number of funds paying double-digit returns slipped to 13 from 14.

Why returns are falling

Money market funds put most of their money into short-term government paper and bank deposits, so their returns follow those rates. Both have come down. The one-year Treasury bill rate eased to 9.03% from 9.39% in mid-October 2025, and the average return on commercial bank fixed deposits dropped to 6.91% in August from 7.5% a year earlier.

Shorter T-bills have followed the same path. At a recent auction the 91-day rate eased to 8.75% even as investors bid KSh68.5 billion. As older, higher-yielding bills mature, fund managers reinvest at these lower rates, which pulls the fund’s average down over time.

Even at 9.3%, money market funds still pay well above a typical fixed deposit. On KSh100,000 held for a year, a 9.3% return works out to about KSh9,300 before withholding tax, compared with about KSh6,910 at the average fixed-deposit rate. That is our own illustration using the published averages; individual funds and banks pay different rates.

Money moving to special funds

Some investors are looking elsewhere. Special funds, which can hold shares, offshore securities and private debt, grew their share of total unit trust assets to 26.6% in the quarter to June 2026, up from 23.9% in March. Over the same quarter, the money market funds’ share fell to 48.5% from 51.9%.

Special fund assets rose 24% in the quarter, against 4% for money market funds. The whole unit trust market held KSh948.7 billion for more than 4.1 million investors.

“It is purely driven by investors chasing returns,” Linus Kang’ara, chief executive of Capital A Investment Bank, told Business Daily. He said investors want to spread their money across several special funds rather than hold everything in one.

Fund managers are launching products to meet that demand. Britam Asset Managers has global equity and multi-asset special funds, Absa has approval for global multi-asset funds in shillings and US dollars, and Lofty-Corban Investments launched a private debt special fund in February.

The risk trade-off

Higher possible returns come with more risk. A money market fund is built for safety and quick access to cash. A special fund can lose value when share prices fall, a borrower defaults or the shilling moves against foreign currencies. Foreign investors have already pulled KSh17.8 billion from the NSE this year, a reminder that equity returns are not guaranteed.

The Capital Markets Authority is working on a rating system for unit trusts and their managers, looking at asset quality, liquidity, volatility, foreign currency exposure and governance. Until it is in place, savers comparing funds should check what each one invests in, its fees and how quickly they can withdraw.

For those who want to lock in government rates directly, our guide on how to buy Treasury bills in Kenya explains the steps. M-Pesa users can also start small through Safaricom’s Ziidi money market fund.