Money Market Funds (MMFs), like the Absa Money Market Fund, are valuable investment vehicles for many Kenyans. According to the latest report by the Capital Markets Authority, these funds contributed 62% of all assets under management (AUM) in the country’s unit trusts by the end of the third quarter of 2024. Their performance reflects the country’s economic activity and investor confidence.
The Absa Money Market Fund is an MMF offered by Absa Bank Kenya PLC, formerly known as Barclays Bank, with Standard Chartered Custody serving as the custodian and KCB Corporate Trustees acting as the trustee of the fund. There are two types: the Absa Shilling Money Market Fund and the Absa Dollar Money Market Fund. For now, we will focus solely on the Absa Shilling Money Market Fund.
Like all other money market funds, the Absa Shilling Money Market Fund is a type of mutual fund required by law to invest in short-term, low-risk securities such as commercial paper issued by corporations, repurchase agreements, bankers’ acceptances, interbank loans, and bills of exchange.
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In financial markets, such money market instruments, with a near guarantee of capital preservation for the investor, also typically include a portfolio of short-term cash deposits alongside debt securities such as treasury bills and government bonds with maturities of one year or less.
Founded in February 2022 and with a fund size of Ksh3.5 billion by September 2023, the Absa Shilling Money Market Fund seeks a high level of current income while preserving capital and maintaining liquidity.
“The objective of the Fund is to generate interest income for an investor from a wide range of Kenya shilling-denominated short-term interest-bearing securities to meet both their short-term and long-term investment plans,” says Absa Bank.
Because MMFs are managed more conservatively than other types of funds, investors are likely to see small but steady returns on their principal investment. Most MMFs aim to keep their net asset value (NAV) at a constant $1.00 per share, meaning only the fund yield fluctuates.
The stable value of a money fund is a major contributor to its success. Any indication that the actual value of the securities might fall below $1.00 can cause shareholder stress. Although this is rare in Kenya, where the Capital Markets Authority enforces strict regulations, asset managers may occasionally reach for higher yields by investing in riskier assets to achieve better returns, especially when competitive pressures arise due to declining risk-free rates.
As of November 2024, the interest rate of the Absa Shilling Money Market Fund stands at 13.49%, up from 13.03% per annum in December of the previous year. Joining is free, but an initial deposit of Ksh1,000 is required, with no minimum top-up amounts thereafter.
To open an account, visit Absa Bank’s website, fill out the form, and you will be contacted with the next steps to get started.
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