CIC Money Market Fund

In a perplexing situation, the CIC Money Market Fund is falling short in a market that offers favorable returns. This raises a central question: “Why isn’t the CIC MMF capitalizing on the higher market rates?”

The current overview of market benchmarks reveals varying returns across different investment instruments. Bank fixed deposits presently offer a 10% return, providing a stable but moderate option for investors. 

Treasury Bills (T-Bills) stand out with a more attractive return, currently offering 15%, presenting a relatively higher yield compared to fixed deposits. Treasury Bonds (T-Bonds) emerge as the top performer in this market scenario, delivering an exceptional return of 17%.

This benchmark overview sets the context for analysis, highlighting the favorable interest rates prevailing in the market. The expectation of an 11% return becomes crucial, offering a reasonable benchmark against which the cic money market fund’s performance can be evaluated.

Analyzing the actual returns generated by the cic mmf reveals several key features and noteworthy aspects. Managed by CIC Asset Management Ltd, the fund requires a minimum investment of Ksh 5,000.00, with subsequent investments of at least Ksh 1,000.00. Notably, the fund imposes no initial fee, and an annual management fee of 2.00% is applied, with distribution occurring monthly.

Comparing this to other funds , where the Old Mutual Money Market Fund is reported to have a management fee of 0.9%, a discrepancy in the fee structure becomes apparent. The cic money market fund’s higher management fee could significantly impact overall returns for investors.

Furthermore, recent changes in excise duty rates, as per the Finance Act 2023, have implications for fees charged by financial service providers. 

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Notably, fees for money transfer services and management fees, previously subject to a 20% excise duty, now face a reduced rate of 15%. This regulatory change is essential to consider in evaluating the fund’s financial dynamics.

Additionally, industry practices in management fees vary, as evidenced by Stanbic IBTC Bank, which notes that management fees are negotiable and can be up to 1% of the principal amount disbursed. 

Comparatively, NCBA Investment Bank charges 2% per year on assets under management, and Standard Chartered Investment Products levies 1% for SC Shilingi Funds, 2.5% for Mutual Funds, and a maximum spread of 3.0% for Fixed Income.

These industry benchmarks illustrate the diverse landscape of management fees, prompting a closer examination of the cic money market fund’s fee structure. 

The fund’s comparatively higher management fee raises questions about its competitiveness and the value it offers to investors, especially when juxtaposed with other financial institutions that offer more favorable fee structures.

A detailed comparison of cic money market fund’s (MMF) performance with industry benchmarks reveals notable factors contributing to its underperformance in 2023.

According to fedhahuru.com, cic money market fund reported a performance of 9.0% in 2023. In the same period, the yield curve inverted, witnessing increases in 2-year bonds by 5.93%, 10-year bonds by 1.89%, and 20-year bonds by 1.99%. This suggests a general upward trend in bond yields during the year.

Contrastingly, centwarrior.com reports a slightly lower annual yield rate for cic money market fund at 8.71% in 2023. In July 2023, the best-performing Money Market Funds (MMFs) were Enwealth, Etica, and Cytonn, each recording an average Effective Daily Yield of 11.43% and 11.41%, respectively. The Apollo Money Market Fund secured the third position with an average Effective Daily Yield of 10.95%.

CIC Money Market Fund faced a challenging performance landscape in 2023, influenced by a multitude of interconnected factors. 

In response to inflationary pressures, the central bank implemented a 100-basis point increase in the policy rate, impacting the fund’s returns. Annual headline inflation surged to 9.2% in March 2023, driven by heightened food and energy costs resulting from unfavorable weather conditions and supply disruptions. 

The persistently high inflation and interest rates prevailing throughout the year created a challenging economic environment, impacting the fund’s overall performance. Fluctuating fuel prices in May 2023 also added an additional layer of complexity to the fund’s investment dynamics.

Globally, the projection of a slowdown in growth to 2.9% in 2023, coupled with a weaker manufacturing sector offsetting gains in the services sector, contributed to the fund’s difficulties.

To enhance cic money market fund’s performance, a strategic reassessment of its investment portfolio in light of changing economic conditions and interest rate dynamics is essential. 

Active management strategies, including dynamic asset allocation, could optimize returns. Additionally, fostering flexibility in response to market shifts and closely monitoring inflationary trends will be crucial. 

For investors seeking alternatives, considering well-diversified funds with adaptive strategies aligned with current market conditions may offer more resilient returns. 

Exploring investment options with a track record of effectively navigating economic uncertainties and adjusting to changing interest rate environments can provide a balanced and potentially more rewarding investment experience.

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