Previously we had a look at what a mutual fund is and the types available to invest in locally. In Kenya, mutual funds are referred to as unit trusts and you can only invest in them through licensed companies.
Mutual funds offer each contributor a certain yield or rate of return in percentage form that is often variable. To invest, one either buys units in the fund – becoming a unit holder – or places their cash directly with the fund manager; depending on the type of fund invested in. Returns are periodically distributed to investors, for example monthly or every six months, and some funds allow investors to redeem their funds at any time within a few days’ notice. The terms of investing and the rates of return vary based on the type mutual fund and the company offering them.
All locally licensed mutual fund companies offer the option to invest in more than one type of mutual fund which will vary on the type of financial investments it makes. Mutual Funds in Kenya fall into the following main categories:
- Money Market Fund – Invests in the money markets that is made up of short-term treasury bills & bonds, cash deposits and call accounts.
- Fixed Income Fund – Invests in securities that give specific returns on specific dates i.e. treasury bills, bonds, cash deposits etc
- Balanced Fund – Balanced Funds invest in a diversified portfolio of shares, bonds and the money markets.
- Equity Fund – Invests in company shares through the stock market.
- Bond Fund – Invests in government and corporate bonds.
- Managed Fund – It pools the collective investments of the employees in a company with returns made available upon their retirement.
To invest in equity, balanced, bond or fixed income mutual funds – which invest in the stock and bond markets – you would need to buy units in the fund entitling you to a share of the returns based on the number of units you hold. The company managing the fund will deduct an initial fee for joining and then apportion the rest of your money to buy units at their current market price.
For example, if you invested KES 10,000 with a local equity fund that charges a 2% initial fee, the amount used to buy units in the fund would be KES 9,800 (KES 10,000 – 2%). This amount would then be divided by the unit market price of your chosen company for that day.
For example, using the latest prices, KES 9,800 would get you 69 units in Dyer & Blair’s Equity Fund at a price of KES 141.03 per unit. The unit prices for mutual funds in Kenya are adjusted daily based on the prices of bond and shares at the Nairobi Securities Exchange (NSE) and published in the local dailies. Not only would you have the opportunity to make money through the possible appreciation of the shares and dividends in the fund, capital gains can also be reaped from the selling your units at a higher price later. Fund managers provide indicative interest rates that serve as a guide on how the fund might perform in the future as the stock and bond markets are not totally predictable.
For money market and fixed income funds which invest in short term debt securities such as treasury bills & bonds, cash deposits and call accounts you would invest you money at a prevailing daily interest rate that is published every working day in local newspapers and receive returns based on this interest rate and at a specified date within one year. These funds only make investments that mature within one year – hence the term “short term” securities.
Here are 7 mutual fund companies based in Kenya and the minimum investment amount they accept for an initial investment their mutual funds:
| Mutual Fund/Unit Trust Scheme | Mutual Funds Offered | Minimum Initial Investment (KES) |
| African Alliance |
*Kenya Shilling Fund Fixed Income Fund Equity Fund Managed Fund |
100,000 |
| Britam |
Money Market Fund Income Fund Balanced Fund *Managed Retirement Fund *Bond Plus Equity Fund |
100,000 |
| Commercial Bank of Africa |
Money Market Fund Equity Fund Balanced Fund *Personal Pension Fund |
100,000 |
| Zimele |
Balanced Fund Money Market Fund |
250 |
| ICEA |
Money Market Fund Equity Fund Growth Fund Bond Fund |
50,000 |
| CIC |
Money Market Fund Balanced Fund Fixed Income Fund Equity Fund |
10,000 |
| Dyer & Blair |
Bond Fund Equity Fund |
10,000 |
*The Kenya Shilling fund is a money market fund which is described earlier.
*The Managed Retirement fund is a type of managed fund which is described above
*Bond Plus is a type of bond fund
*Personal Pension fund is one where an individual’s contributions and returns are redeemed upon retirement.
Mutual funds in Kenya also allow you to top up your investment with a minimum amount that is usually specified.