Investors Shift to Special Funds as returns from money market funds (MMFs) in Kenya have declined to 9.3 per cent, down from 9.9 per cent recorded a year earlier, as falling interest rates reduce earnings for savers.
The average annual return after fees stood at 9.3 per cent as of October 15, 2026. The decline reflects lower returns from Treasury bills and bank deposits, which form the main investments held by money market funds.
The drop is pushing investors to explore alternative investment options that offer higher returns, particularly special funds that invest in a wider range of assets.
Of the 26 money market funds tracked, 20 recorded lower annualized returns compared with the previous year. Only six reported improved performance: African Alliance Kenya, Faulu, Genghis, KCB, Madison and Sanlam Allianz. The number of funds offering double-digit annual returns also fell slightly from 14 to 13.
Returns from other savings instruments have followed a similar trend. The interest rate on the one-year Treasury bill dropped from 9.39 per cent in mid-October 2025 to 9.03 per cent currently. Meanwhile, average returns on commercial bank fixed deposits declined from 7.5 per cent in October 2025 to 6.91 per cent in August 2026.
The changing investment landscape has also affected the share of money market funds in Kenya’s collective investment schemes, which include various unit trusts.
Money market funds accounted for 48.5 per cent of total unit trust assets in the quarter ended June 2026, down from 51.9 per cent in March. In contrast, special funds increased their market share from 23.9 per cent to 26.6 per cent during the same period.
Assets held in special funds grew by 24 per cent in the quarter, compared with a four per cent increase in money market funds. Capital Investment Bank chief executive Linus Kang’ara attributed the shift to investors seeking better returns.
Special funds can deliver higher returns because they invest across multiple asset classes, including unlisted shares and offshore stocks. However, these investments carry moderate to high risks, unlike money market funds, which mainly invest in lower-risk assets such as bank deposits and short-term government securities.
Despite the decline in returns, money market funds remain Kenya’s most popular unit trust investment category. However, fund managers are increasingly expanding into alternative products as investors seek more ways to diversify their portfolios.
The market is also expected to see more specialized funds targeting specific assets, including artificial intelligence stocks, semiconductors and metals.