The government has been the main source of cash for banks, largely funded by diamond revenues, which are now steadily declining. With banks competing harder for funds, economist Dr Keith Jefferis notes that they have been offering rates of 15–20%, attracting money from deep-pocketed investors, including unit trust funds. In this third instalment of Investing in a High-Interest Rate Environment, we look at how unit trusts have been performing under these conditions.
As banks scrambled for cash, asset managers were able to demand better rates, driving stronger returns on bank deposits. According to Bifm unit trust factsheets, banks have been offering much better interest rates on deposits that last less than a year, compared to those that run for more than a year.
Available data shows that money market unit trusts, which mainly invest in fixed deposits, have delivered some of their strongest performances in years.
Why Liquidity Matters
When liquidity in the banking system dries up:
- Banks need to attract deposits
- To attract deposits, they raise interest rates
- Money market funds, which place large deposits, can negotiate even better rates
- Investors end up earning higher yields
Here’s a simple breakdown of what happened and how each major fund performed. This is according to data by the Botswana Stock Exchange (BSE).
This theme repeated across all the funds reviewed below.
- Vunani Money Market Fund
What the Fund Does: Invests in major banking groups and other strong-rated financial institutions.
Performance according to factsheet:
- Q2 2025: Outperformed its benchmark by 0.48%
- Benefited from negotiating stronger deposit rates.
- Q3 2025: Outperformed by 0.73%
- Continued liquidity pressure drove returns further.
2. Bifm Pula Money Market
The Bifm Pula Money Market Fund invests in Call and Fixed deposits and Treasury Bills.
Asset Allocation: 92.70% in Fixed Deposits, NCDs & Accepted Bills.
Q1 2025 Performance according to factsheet:
- Fund return: 1.56%
- Benchmark: 0.20%
- Bifm said banks priced deposit rates aggressively for under 12 months.
- Bifm expects yields to stabilise soon.
Q2 2025 Performance
- Fund return: 2.15%
- Benchmark: 0.20%
- Liquidity remained tight, keeping deposit rates elevated.
- 3–12-month deposits were the most competitive among banks, according to Bifm.
3. iPRO Botswana Money Market Fund (IBMMF)
Invests in a wide range of high-quality Botswana Pula-denominated money market instruments, which include: Government of Botswana Bonds and Treasury Bills, Negotiable Certificates of Deposit, Fixed Deposit placements, Debenture Promissory Notes, Corporate Bonds, Repurchase Agreements, Variable and Floating Rate Notes
Performance Snapshot (June)
- Monthly (June 2025): 0.91%
- 3-month ending June: 2.70%
- 12-month ending June: 7.77%
- Strong outperformance versus the benchmark Overnight Call Rate (0.14% and 0.55%) for the same periods.
4. Morula Cash Plus Fund
Investment Mix:
- 70.32% in fixed deposits and cash.
September Performance according to factsheets:
- Fund: 0.95%
- Benchmark: 0.99%
- Still far better than September 2024 (0.58%) and 2023 (0.64%).
5. Kgori Capital USD Money Market Fund
Who This Fund Is For: Investors needing capital preservation, USD exposure and high liquidity. Invests only in investment-grade banks.
Asset Allocation:
- 95.4% in fixed deposits
- Remainder in call instruments
Performance according to factsheet as at September 2025:
- 3 months: 0.74% (return) vs 0.39% (benchmark)
- 6 months: 1.45% (return) vs 0.78% (benchmark)
- YTD: 2.14% (return) vs 1.16% (benchmark)
5. Kgori Capital Cash Strategy
How the Fund Invests:
- Short-dated, low-risk instruments from top-tier banks and corporates.
- 93.2% in fixed deposits.
Performance as at September 2025:
- 3 months: 1.70% (return) vs 0.57% (benchmark)
- 6 months: 3.27% (return) vs 1.12% (benchmark)
- YTD: 4.48% (return) vs 1.68% (benchmark)
Money Market Funds Thrived Because Banks Needed Cash
Across all funds, one story repeats:
1. Liquidity in the banking system tightened.
2. Banks raised deposit rates to attract funding.
3. Money market funds, which supply that funding, earned higher returns.
4. Investors enjoyed better yields and consistent outperformance.
With rates being this high, one thing remains for sure: the government, which has been the main liquidity provider through Debswana, still relies heavily on diamond revenues, which have been in perennial decline, and looks set to still compete with banks for money. But Bifm expect rates on deposits to stabilise.
In the last instalment of investing in a high-yield environment,
