For a long time, money market funds and bank deposits were the natural choice for parking short-term cash. They were easy to access, stable and predictable.
However, with the Central Bank Rate now at 9.00 percent following the December Monetary Policy Committee decision, and inflation averaging 4-5 percent since the start of the year, many Kenyans are asking a deeper question: how can they protect the value of their savings without taking on excessive risk?
Economic conditions are shifting. The high interest rate cycle of 2023 and early 2024, gave money market funds an impressive run, but the same conditions that boosted their appeal are now showing their limits.
Money market funds are structured to invest in short term instruments, so when interest rates start to ease, their yields adjust downward quickly. Investors are therefore looking for options that offer stability and better returns, especially in a lower rate environment.
Fixed income funds: A practical alternative
Fixed income funds work on a simple principle: investors pool their money together, and professional managers invest it in interest-bearing assets such as government and corporate bonds, treasury securities, and term deposits.
These instruments pay regular interest (coupon payments), which the fund collects. After deducting fees incurred for running the fund, this income increases the overall value of the portfolio, reflected in the fund’s unit price or yield. In some cases, investors also receive periodic income distributions.
Fixed income funds show smoother performance because returns come mainly from interest payments rather than capital gains.
Diversification across issuers and maturities cushions investors from defaults or sudden market swings. Financial advisers often call them the ‘steady middle’ in a balanced portfolio -higher potential than cash, lower volatility than shares.
For investors seeking liquidity and financial progress, this middle ground is increasingly attractive.
Some of the benefits for those investing in fixed income funds include stable and regular income stream, professional fund management services and transparency conducted under a regulated framework.
Tips for new investors is to start small, review each fund’s objectives and performance, and understand redemption timelines.
Fixed income funds are not a quick-profit solution; they are a disciplined way to earn interest while preserving value over time.
When selecting a fund, look beyond headline yield. How the manager spreads maturities and manages credit risk determines resilience. Liquidity terms also matter; some funds allow same day redemptions while others a few days. Stanbic’s product offers easy entry and exit through digital platforms, allowing investors access to its funds without locking up large sums.
The rise of such funds strengthens Kenya’s capital markets by channelling domestic savings into regulated investment schemes. This supports development financing and reduces reliance on external borrowing.
For years, investing in bonds has been accessible only to a small section of the population since directly owning these bonds required at least Kenya Shillings fifty thousand upfront. Unit trusts have changed that completely.
They allow ordinary savers to access the bond market indirectly by owning a portion of a professionally managed portfolio of a fixed income fund.
Stanbic’s new Kenya Shilling denominated fixed income fund builds on this approach.
It aims to deliver regular income in local currency while carefully managing interest rate and credit risks. Investors can start with as little as Sh1,000 through the Stanbic mobile app, via USSD *208#, or at any branch, making the product practical and inclusive.