The transition to the Zimele Savings Plan from the Money Market Fund to the Fixed Income Fund was done after receiving approvals from the Capital Markets Authority (CMA), and members during the 14th Annual General Meeting of the Zimele Unit Trust in 2021.
The transition marked a significant step in our ongoing efforts to enhance the investment options available to our customers, aligning with our commitment to offering diversified and stable investment solutions.
Background of the Transition
The transition from a Money Market Fund to a Fixed Income Fund for the Zimele Savings Plan is rooted in compliance with various CMA regulations including Circular Number 8 of 2020 and the Collective Investment Schemes Regulations of 2023.
These regulations standardized a fund’s composition and investment performance measurement to entrench international best practices.
The new regulations set out how each fund should be classified and managed based on asset class or maturity of assets as follows:
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- Money Market Fund: Invests only in interest-earning money market instruments which have a maximum weighted average tenor of eighteen (18) months.
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- Fixed Income Fund: The fund shall invest a minimum of 60% of the market value of its asset in fixed income securities at all times. Fixed income securities refer to financial instruments with a fixed maturity and may or may not make periodic payments of interest and the principal is paid at maturity.
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- Balanced Fund: The fund shall invest in all eligible asset classes provided that investments in money market, equities and fixed income instruments shall each have a maximum exposure of 60% of the market value of assets under management.
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- Equity Fund: The fund shall invest a minimum of 60% of the market value of its asset under management in equities listed locally on a securities exchange, listed in other regulated exchanges or unlisted equities at all times. Any funds not invested in equities shall only be invested in cash and cash equivalents.
It is against this background that the ZMMF transitioned to the Zimele Fixed Income Fund (ZFIF), ensuring adherence to regulatory requirements and optimizing the investment strategy for stability and consistent returns.
Key Benefits of the New Fund Structure
- No Time Limits: Fixed Income Funds can invest in eligible assets without any maturity restriction. They are allowed to invest in both short term securities like treasury bills and long-term securities like treasury bonds.
- Enhanced Stability through Diversification: Fixed Income Funds are generally less volatile because they are able to diversify across investments of different maturities and return profiles, providing a safer investment vehicle.
- Regular Income Streams: The new fund structure focuses on generating regular income, appealing to customers who prioritize steady cash flow from their investments.
- Higher Returns: Typically, bonds offer higher returns compared to short-term money market securities like treasury bills and bank deposits. This relationship follows from the observation that long term securities have higher returns than short term securities. Fixed income funds have the advantage of investing in both short-term securities for liquidity management and long-term securities for better and consistent returns over time making them more suitable for goal-based investing.
Seamless Transition
Customers in the Zimele Savings Plan were automatically transitioned to the Zimele Fixed Income Fund. The migration process was seamless, with no action required from our customers. This transition did not disrupt the investment experience and the terms and conditions did not change.
Looking Ahead
As we continue to evolve and adapt to changing market conditions, we remain dedicated to delivering value to our customers. The shift to a Fixed Income Fund is part of our broader strategy to offer investment solutions that ensure stability and consistency in performance.
This is part of our continuing journey to empower our customers with appropriate investment solutions that will enable them to actualize their dreams.