Why Your Money Market Fund Returns Are Shrinking: CS John Mbadi Speaks Out
Treasury Cabinet Secretary John Mbadi has warned Kenyans to rethink their investments in Money Market Funds (MMFs).
“MMFs Are No Longer as Lucrative”
Mbadi didn’t sugarcoat the issue. He made it clear:
“Interest rates have been going down, especially the rate at which the government borrows (T-Bills).”
He explained that when he joined office, 91-day Treasury Bill (T-Bill) rates were at 15%. But now, they’ve dropped below 9%.
“Right now, it is going below nine per cent, going to eight for 91-day T-Bills,” he stated.
As a result, returns from MMFs—which heavily depend on these T-Bills—have also declined.
“So money market (funds) is not as lucrative as it used to be,” he warned.
Here’s Why Your Yield Is Dropping
T-Bills are short-term government securities, often viewed as safe investments. However, their yields have plunged.
This matters because MMFs typically invest more than 50% of their portfolios in T-Bills.
So, when T-Bill interest drops, MMF returns follow suit.
“It is better for the economy as a whole but it may not be good for an individual investor,” Mbadi explained.
The Slow But Steady Decline
Many investors haven’t noticed yet. But the drop is already underway.
MMF returns don’t crash overnight. Instead, they decline gradually.
The result? Lower earnings for investors over time—especially if low interest rates persist.
Consider Other Investment Options
With inflation on the rise, and MMFs returning less, Mbadi advised caution.
While MMFs still offer low-risk stability, they may no longer outpace inflation or rival other fixed-income instruments.
Final Word from Mbadi
“I know some of you who have been into MMFs are wondering what the government is going to do,” Mbadi said.
“Just be cautious,” he concluded.
His message was clear: Stay informed. Diversify. Adjust expectations.
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Why Your Money Market Fund Returns Are Shrinking: CS John Mbadi Speaks Out
