NAIROBI, Kenya Jan 5-Money market funds continued to perform better than all the other asset classes such as equities and real estate in 2021 , for the second year in a row, a new Cytonn report shows .
The analysts at Cytonn attributed the good performance of the Money market funds to their higher returns as compared to the returns offered by the other asset classes.
“Money market funds offer a good safe haven for investors who wish to switch from a higher risk portfolio to a low risk portfolio, especially in times of uncertainty,” said Cytonn in a statement.
During the period under review, the Cytonn Money Market Fund (CMMF) had the highest effective annual yield of 10.5 per cent compared to an industry average of 8.8 per cent.
Notably, the other asset classes recorded improvements from 2020 with NASI being the largest gainer having increased by 14.1 percentage points to a return of 5.5 per cent, from a decline of 8.6 per cent in 2020, as investors sought to profit from the recovery in stock prices from last year’s lows.
Additionally, the gradual economic recovery following the reopening of the economy contributed to the improvement.
Further, the returns by the various asset classes improved in 2021, with the 364-day, 182-day and 91-day Government papers recording yields of 9.4 per cent, 8.1 per cent and 7.3 per cent, respectively, while real estate yield and NASI recorded returns of 7.1 per cent and 5.5 per cent respectively.
However, the average returns of the top five Money Market Funds recorded a 0.2 percentage points decline to 9.5 per cent in December 2021, from 9.7 per cent recorded in December 2020.
In 2021, there was relatively low demand for Treasury-bills auctions as the average subscription rate came in at 94.1 per cent, down from the 130.9 per cent subscription rate recorded in 2020.
This was due to investors shifting their interest to the bond market in search of higher yields.
On the other hand, primary Treasury-bond auctions in 2021 were on a high demand, with the subscription rate averaging 147.6 per cent, which was higher than the 130.6 per cent average subscription rate recorded in 2020, partly attributable to the ample liquidity in the money market.The market preferred the medium-term bonds, in a bid to hedge against duration risk.“We expect the economic recovery seen in 2021 to continue in 2022. Additionally, we expect the interest rates environment to remain stable as […]