EGX is still waiting for its share of the fund boom

Why the fund boom is still a government debt story: Money market funds added roughly 4x as much in assets as equity funds in 1Q 2026 (EGP 55.2 bn against EGP 12.8 bn), by our math. That lead narrowed to about 1.6x in 2Q against the equity and Islamic equity lines (EGP 24.8 bn against EGP 15.3 bn) and reversed in 3Q. Still, the funds, which invest primarily in T-bills, short-term deposits, and certificates of deposit (CDs), held some EGP 303.1 bn by the end of September, or 60% of an industry that crossed half a tn to hit EGP 504.71 bn, according to Financial Regulatory Authority (FRA) data (here, pdf, here, pdf, and here (pdf)).

For all the growth in the investment fund industry, the government remains one of its biggest beneficiaries, by our read. That’s because money market, fixed-income, mixed, and FX funds held EGP 393.3 bn of the EGP 504.7 bn industry at the end of September, while the EGX is still waiting for that boom to translate into a deeper pool of equity investors.

And the rate cycle hasn’t done much to change the picture. Money market fund returns eased to 4.29% in 2Q from 4.76% in 1Q, before recovering to 4.95% in 3Q. Our read is that the dip reflects the pass-through of lower rates into the short-term instruments they hold. None of that has stopped money market funds from dominating the industry, and last week’s 100 bps hike from the central bank, which took the overnight deposit rate to 20%, has only made government paper more attractive.

Percentages tell a slightly different story: Money market funds park short-term money in T-bills, deposits, and CDs that mature within 13 months, while equity funds hold listed shares for longer. Equity fund assets grew 36.1% in 2Q, compared with 9.1% for money market funds, but the latter still added roughly EGP 24.8 bn in assets against some EGP 8.6 bn for equity funds, by our math. The gap comes down to arithmetic, by our read: money market funds ended June with a base 9.2x larger (EGP 296.9 bn against EGP 32.2 bn), so a far smaller percentage gain still adds more EGPs. Asset changes also include investment returns, not just fresh subscriptions. The FRA reclassified funds with the Egyptian Investment Management Association in 2Q, according to its July release, restating its end-March count from 187 funds to 209 and NAV at about EGP 411 bn, so comparisons with earlier quarters aren’t like-for-like.

Why T-bills dominate

A lot of it comes down to how money market funds are allowed to invest under the executive regulations governing mutual funds. Their holdings cannot have maturities beyond 13 months, or 396 days, and their weighted average duration cannot exceed 150 days, Khalil El Bawab, CEO for local and regional markets at Beltone Holding, tells EnterpriseAM. T-bills, which run around five months in maturity, are the natural destination. Deposits, meanwhile, are capped at 10% of a fund’s portfolio, leaving the bulk of the allocation for T-bills and bonds, he said.

There’s also the question of liquidity: Money market funds take subscriptions and redemptions daily, so managers need instruments they can trade quickly without taking on much price risk, El Bawab says. At Beltone, for example, the subscription cut-off is noon, leaving a roughly two-hour window to buy T-bills with incoming money or sell holdings to meet withdrawals, adds El Bawab, who also chairs the Egyptian Investment Management Association. The result, by our read, is a savings product rather than an investment one: liquidity and capital preservation first, with government paper doing most of the heavy lifting.

Savers aren’t trading the rate

“It doesn’t slow,” El Bawab says of money market fund subscriptions during an easing cycle, and he doesn’t think rate moves drive them in either direction. “Even if there is an interest rate cut, that doesn’t make it less attractive, and a rate hike doesn’t make it more attractive.” Investors aren’t necessarily weighing money market funds against equities, he argues, because the two serve different purposes. “At the end of the day, the money market fund is a savings vehicle or a [liquidity] management vehicle. It’s not a 100% investment vehicle.”

Why data from 3Q complicates that: Money market fund assets rose EGP 6.2 bn last quarter, but the category returned 4.95%, enough on its own to add some EGP 14.7 bn. That implies a net outflow of roughly EGP 8.5 bn over the three months, by our math. Other categories grew over the same period: index funds nearly doubled to EGP 13.14 bn, Islamic equity funds grew 27%, and precious metals funds added EGP 2.5 bn.

That said, a long enough stretch of low rates could still move more money into equities, El Bawab says, a case that last week’s hike pushes further out. He has no precedent to point to, since Egypt hasn’t run a sustained low-rate cycle in more than a decade, and never with a fund industry this large. The last time borrowing costs were this low, investors had fewer products to choose from, digital onboarding was far less common, and online trading hadn’t opened up the market to the same extent.

Equities are making headway

Equity funds are taking a bigger slice of the market, and the pace picked up sharply in 3Q: index funds grew 83% over the quarter against 2.1% for EGP money market funds, even if government debt still accounts for most fund assets. El Bawab points to the changing mix of the industry: in 2020, roughly EGP 95 of every EGP 100 invested in funds went into money market and fixed-income products, compared with about EGP 80 today — the FRA put it at EGP 78 at the end of September. “That’s a success,” he said.

The growth in EGP is just as striking: Equity funds, including conventional and shariah-compliant, ETFs, and thematic strategies, have grown from around EGP 2.6 bn in 2020 to roughly EGP 74 bn as of August, according to his figures. His pool is the one the FRA counts as equity-type funds — EGP 74.8 bn at the end of September, against EGP 36.0 bn on the FRA’s narrower “equity funds” line. Still, he expects money market and fixed-income products to retain the lion’s share of assets, reflecting what he describes as Egypt’s long-standing preference for saving over investing.

Both things are true at once, by our read. Equity funds hold a larger share than they did five years ago, and because the pool itself has grown so much, money market and fixed-income funds can keep growing in EGPs even as their share slips.

SOUND SMART- Egypt’s fund industry remains small by international standards, with assets under management equivalent to some 2% of GDP even after tripling in size, El Bawab estimates. The comparable figure is roughly 63% globally, around 120% in the US, 70-80% in Europe, and 20-25% across emerging markets. Matching the emerging-market average would mean an industry roughly 10x today’s size, by his math.

The institutional money question

Beyond retail savings, there’s another potential source of demand for Egyptian equities. Some ins. funds are already required to invest a portion of their assets in the stock market. FRA Decision No. 269 of 2024 requires defined-benefit private ins. funds to allocate 5-20% of their assets to open-ended funds investing in EGX-listed shares, Hatem Badr, partner and head of banking, finance, and M&A at Ibrachy & Dermarkar, tells EnterpriseAM. They can also invest up to 15% directly in listed shares, provided their combined equity exposure stays within 25%.

Government ins. funds with portfolios exceeding EGP 100 mn face the same 5-20% requirement, according to Badr, while ins. companies have minimum equity fund allocations of their own. But the rules also leave considerable room for fixed income: defined-benefit funds are allowed to invest 15-70% in bonds, T-bills, and government-guaranteed securities, and up to 40% in fixed-income and money market funds, he adds.

And with government paper still offering attractive yields, there’s little reason for trustees to take on more equity risk than they need to, by our read. Government securities combine high nominal returns with liquidity, relatively straightforward valuations, and limited short-term volatility, all of which carry weight for institutions managing beneficiaries’ money. As Badr puts it, where government securities already pay well, “the expected additional return from equities must justify the additional volatility.”

OUR TAKE- The local fund industry is getting bigger and more diversified, but that growth isn’t yet translating into a comparable increase in demand for listed equities. Money market funds remain the industry’s dominant product for good reason: they offer investors liquidity and relatively low risk while giving managers a natural reason to keep much of their portfolios in government paper, particularly when T-bills are paying attractive yields. A return to easing could eventually push more money toward the EGX, but not on its own: the products drawing most of the money are built to serve savers, not investors seeking equity exposure.

That’s where mandated money comes in: The rules are already feeding the industry — Azimut’s Ahmed Abou El Saad told us in June that the biggest driver of equity fund growth was the FRA requiring private ins. funds and ins. companies to hold minimum allocations in equity funds. But the pool itself is still overwhelmingly in debt. Private ins. funds held EGP 210.9 bn in investments at the end of last year, of which EGP 88.27 bn sat in government-guaranteed securities and EGP 88.05 bn in deposits and savings certificates, against EGP 4.46 bn in EGX-listed shares, according to the FRA’s annual report on the sector.

What’s next: Private ins. funds have until 31 December to meet their minimum equity allocations, after the FRA extended the deadline back in August.