Capital Markets

Old Mutual money market fund posts 7.3 percent return

PETER

Old Mutual Unit Trust Funds Chairperson Mr Peter Kimurwa. PHOTO | DELFHIN MUGO | NMG

Summary

  • This was an improvement from 5.06 percent return generated in 2020 and indicates that the asset manager benefited from rising interest rates.
  • Assets in the money market fund are predominantly invested in fixed bank deposits, followed by government bonds.
  • Fixed deposit accounts had average rates of 6.4 percent last year while most medium to long-term bonds had yields of more than 11 percent.

Old Mutual’s money market fund — its biggest — delivered returns of 7.3 percent after expenses last year.

This was an improvement from 5.06 percent return generated in 2020 and indicates that the asset manager benefited from rising interest rates.

Assets in the money market fund are predominantly invested in fixed bank deposits, followed by government bonds.

“Yields on government securities moved higher across all sections of the yield curve mainly on increased borrowing appetite by the government,” Peter Kimurwa, chairperson of Old Mutual Unit Trust Funds, said in the latest annual report.

Fixed deposit accounts had average rates of 6.4 percent last year while most medium to long-term bonds had yields of more than 11 percent.

Investors in money market funds get returns in addition to the ability to access their capital instantly or in a few days.

Old Mutual’s money market fund had an average daily investor withdrawal of Sh2.5 million last year, down from Sh2.6 million in 2020. The asset manager’s equity fund — its second-largest — posted the highest return of 11.44 percent in the review period when share prices rose from lows set in the wake of the Covid-19 pandemic the year before.

The performance marked a reversal of a 4.48 percent loss seen in the fund in 2020.

“The equity market bounced back in 2021 on the improved macroeconomic environment, full reopening of the economy, corporate earnings recovery and resumption of dividend payments that in totality improved investor sentiment,” said Mr Kimurwa.

Old Mutual’s balanced fund had a 5.19 percent return last year, declining from 7.08 percent in 2020.

Most of the fund’s assets were invested in government bonds at 61.44 percent, followed by fixed deposits (32.04 percent).

The bond fund has the lowest return of 4.08 percent in the review period, dropping from 5.37 percent the previous year.

Old Mutual said interest rates on government securities are likely to rise this year on the back of rising inflation.

The asset manager noted that the downturn seen in the equities market seen so far could persist as foreign investors react to geopolitical events and sit on the sidelines as Kenya goes to the August general election.

[email protected]