Kenya’s money market fund returns have fallen to an average of 9.3% after fees, down from 9.9% a year earlier, as lower interest rates reduce the income available from the short-term securities and bank deposits that underpin the popular investment products. The decline is coinciding with faster growth in special funds, which offer exposure to a wider range of assets and have attracted investors looking for higher returns.
Data covering 26 money market funds (MMFs) shows that 20 recorded lower annualised returns by October 15, 2026, compared with the same period last year. Only six posted increases: African Alliance Kenya, Faulu, Genghis, KCB, Madison and Sanlam Allianz. The number of funds offering double-digit annualised returns fell to 13 from 14 over the period.
The pressure on MMF yields reflects conditions in the wider domestic fixed-income market. The one-year Treasury bill rate declined to 9.03% from 9.39% in mid-October 2025, while returns on commercial bank fixed deposits fell to 6.91% in August from 7.5% a year earlier.
MMFs invest primarily in short-term instruments, including government securities and bank deposits, meaning the income they generate responds to prevailing market rates as their portfolios mature and managers reinvest the proceeds. As older investments roll off, lower yields on replacement instruments can gradually reduce the returns available to unit holders.
Special funds grow faster than MMFs
The decline in money market fund returns comes as special funds claim a larger share of Kenya’s collective investment scheme market. Their share of total assets rose to 26.6% in the quarter ended June 2026, from 23.9% in March, while MMFs’ share fell from 51.9% to 48.5%.
Special funds recorded quarterly asset growth of 24%, compared with 4% for MMFs, making them the fastest-growing category of collective investment schemes during the period. The market’s total assets stood at KSh948.7 billion by June, serving more than 4.1 million investors across the various types of unit trusts.
The figures reflect a broader change in Kenya’s investment market, where the range of regulated products now extends beyond conventional cash-management funds to global equities, multi-asset portfolios and private debt. MMFs remain the largest category by assets, but their share has declined substantially from the levels recorded earlier in the decade as investors and fund managers embrace other investment strategies.
Linus Kang’ara, chief executive of Capital A Investment Bank, attributed the growth of special funds to investors seeking higher returns.
“The growth of special funds vis-à-vis MMFs is purely driven by investors chasing returns. Kenyans are synonymous with chasing higher yields,” Kang’ara said.
He added that the availability of higher-yielding opportunities through regulated investment products would attract more participants to the market. Investors can use special funds to access asset classes and strategies that are generally unavailable through conventional money market portfolios.
Global investments broaden options for Kenyan investors
Fund managers have responded to demand by introducing products that give local investors exposure to overseas markets and specialised investment strategies. Britam Asset Managers, for example, has introduced global-equity and multi-asset special funds covering international investment opportunities, including technology and artificial intelligence. Absa has also secured approval for global multi-asset products denominated in Kenyan shillings and US dollars.
The expansion follows earlier growth in special funds managed by firms such as Standard Investment Bank, whose MansaX offering has become a prominent participant in the market. These products can use strategies involving international securities, derivatives and hedging, depending on their mandates, while other funds concentrate on specific asset classes.
Private debt is another area of development. Lofty-Corban Investments introduced a private debt-focused special fund in February 2026, giving investors another route into an asset class that differs from the government securities and bank deposits commonly held by MMFs.
Kang’ara expects the market to accommodate more specialised products as investors seek ways to diversify their holdings across different strategies rather than concentrating their money in one fund.
“The more the merrier. The demand we are getting from Kenyans is that they are looking for more opportunities and would want to diversify their investments within special funds, so that they are not just holding all their assets in just one special fund,” he said.
The development also creates opportunities for investment managers to differentiate their offerings in a market where MMFs have attracted large numbers of providers. Global thematic funds focused on areas such as semiconductors, artificial intelligence and metals are among the products that could broaden the choices available to Kenyan investors.
Higher returns come with different risks
Special funds can generate higher returns than MMFs because they have greater flexibility to invest across asset classes with different income and growth characteristics. That flexibility, however, also exposes investors to risks that are less prominent in conventional money market portfolios.
MMFs generally hold short-term government securities, bank deposits and other money market instruments, making them suitable for investors who prioritise liquidity and relatively low risk. Their returns can fall as interest rates decline, but their underlying investments typically have shorter maturities than the assets held by many special funds.
Special funds, by contrast, may invest in equities, offshore securities, private debt and other assets whose prices or valuations can fluctuate. Unlisted investments can be harder to sell quickly, while international portfolios may expose investors to exchange-rate movements and overseas market volatility. The risks vary considerably between funds, depending on their investment mandates and portfolio composition.
Kenya’s Capital Markets Authority is considering ratings for collective investment schemes and their managers, with attention to factors such as asset quality, liquidity, volatility, foreign-currency exposure and governance. The proposed framework would give investors additional information to consider when comparing funds that offer different returns and risk profiles.
For investors, the declining average MMF return provides a reason to review available options, but the highest advertised yield is not necessarily the best measure of suitability. Fees, access to funds, investment duration and the underlying assets all affect whether a particular product matches an investor’s financial needs.
As Kenya’s collective investment scheme market expands, MMFs are likely to remain an important option for cash management, while special funds provide routes into a wider range of investments. The central challenge for investors is to balance the pursuit of higher returns with the risks they can afford to take and the time they can leave their money invested.
Real ESG impact doesn’t happen in panels alone, it happens in the rooms where financiers, operators, and policymakers actually align. Our GreenShift Forum 2026 cuts the noise, bringing together the people rewiring Africa’s sustainability and energy frameworks for one focused day in Nairobi. Secure your seat.
Go to TECHTRENDSKE.co.ke for more tech and business news from the African continent and across the world.
Follow us on WhatsApp, Telegram, Twitter, and Facebook, or subscribe to our weekly newsletter to ensure you don’t miss out on any future updates. Send tips to editorial@techtrendsmedia.co.ke
