Money Market Funds (MMFs) continue to remain one of the most preferred investment options for some Kenyans seeking better methods of saving their money.
An MMF is generally a low-risk investment that provides a platform for people to save while earning moderate interest and allowing them to withdraw their finances anytime they need.
Choosing the right MMF to invest your finances could be overwhelming due to the many available fund managers, ranging from commercial banks, real estate firms and insurance companies.
Thus, the process of selecting a proper fund manager requires a clear roadmap which aligns with one's financial muscles and their objectives.
According to Abojani Investment, one of the leading financial and investment advisory firms in Kenya, choosing the right fund manager is key to fulfilling one's financial goals.
Below is a list of factors that an investor should consider before choosing an MMF.
1) Total Assets Under Management (TUM)
This is the total value of all assets that are held by a fund manager on behalf of the investors. A higher TUM indicates the confidence that investors have in a particular fund manager.
It also signifies the fund manager's ability to handle large quantities of money.
2) Manager’s investment objectives
This will help an investor place their money in an MMF that aligns with their objectives. For instance, an investor seeking to invest in treasury bills or bonds will preferably invest in a fund manager who has a similar preference.
3) Performance track record for the last 3 years
Reviewing a fund manager's performance for the last three years provides an investor with adequate insight into the best-performing MMF in the market.
4) Types of investments held
Understanding the type of investment held by the fund manager, whether it is in equities, bonds or real estate, helps one assess the level of returns or potential risks that they could face by investing in a specific Fund.
5) Custodian and trustee
An investor should seek to know whether a fund manager has an independent trustee or custodian. An independent custodian guarantees an investor the safety of their finances should anything happen.
6) Management fees and other charges
By understanding the fees charged by a fund manager, an investor is able to know the final returns they will get once they invest in a specific MMF. Preferably, an investor should compare the fees in different MMFs before settling on the final investment destination.
7) Technology & ease of use (app/website)
An investor should also consider a fund manager who offers user-friendly platforms for easy access to their funds. This is either through the use of digital applications or user-friendly websites for convenience.
8) Years of existence
A fund manager who has vast years of experience in the vast market cycles is best placed to handle an investor's funds due to their ability to navigate the volatile and ever-changing financial markets.
9) Reputation & credibility
As an investor, you should search for a fund manager's track record and regulatory compliance, specifically whether they have been licensed by the Capital Markets Authority (CMA).
10) Historical returns
This gives an investor the insight to gauge how the fund manager performed in different market levels and how they navigated the challenges.
