Kenya’s Investment Landscape Transforms as Special Funds Challenge Money Market Dominance in Sh680bn CIS Sector

Kenya’s Collective Investment Schemes (CIS) market continued its dramatic shift toward low-risk yet diversified assets in the third quarter of 2025, with Money Market and Special Funds strengthening their dominance as total industry assets rose to Sh679.6 billion, new data from the Capital Markets Authority shows. The figure represents a remarkable 14 percent jump from the Sh596.3 billion recorded in the second quarter of the year, underscoring the rising importance of these investment vehicles in mobilizing domestic savings during a period of challenging macroeconomic conditions.

The growth trajectory is even more impressive when viewed over a longer timeframe. The CIS market has grown more than tenfold in seven years, surging from Sh56.6 billion in March 2018 to Sh679.6 billion in September 2025—a staggering 1,100 percent increase that reflects both the maturation of Kenya’s capital markets and growing investor sophistication in seeking professionally managed investment solutions.

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Money Market Funds Maintain Leadership Despite Declining Share

Money Market Funds remained the largest segment, expanding to Sh400 billion—58.9 percent of all assets under management. The Capital Markets Authority attributes the sustained appeal of MMFs to investors’ preference for stability amid a challenging macroeconomic environment characterized by elevated interest rates, persistent inflation concerns, and economic uncertainty that has made capital preservation a priority for both retail and institutional investors.

“Money Market Funds dominate the CIS market at Kshs 400 billion, representing 58.9 percent of the total AUM,” the CMA report notes, citing their low-risk profile as the key driver of demand. These funds typically invest in short-term government securities, fixed deposits, and commercial paper, offering investors liquid, relatively stable returns without the volatility associated with equity markets.

However, the long-term trend reveals a significant shift in investor preferences. Although Money Market Funds still dominate, their share has reduced over the last four years from above 90 percent in 2021 to 59 percent in September 2025 as more investors diversify into higher-yielding Special and Fixed Income Funds. This gradual decline in market share, even as absolute assets continue to grow, signals a maturing investment landscape where sophisticated investors increasingly seek diversification beyond traditional low-risk instruments.

Within the Money Market Fund segment, Sanlam MMF controls the largest share at 25.8 percent, followed by CIC MMF at 21.3 percent. These two industry giants have built their dominance through consistent performance, robust digital platforms, and aggressive marketing strategies that have resonated with Kenyan investors seeking reliable wealth preservation vehicles. The competition between these market leaders has driven innovation in product features, with both offering mobile app-based investing, instant M-Pesa integration, and competitive fee structures.

The Rise of Special Funds: A Market Revolution

A notable shift in the quarter was the rapid rise of Special Funds, which have now overtaken traditional Fixed Income Funds to become the second-largest category in Kenya’s CIS ecosystem. Special Funds grew 22 percent to Sh137.8 billion, accounting for 20.3 percent of the market. This surge represents one of the most significant structural changes in Kenya’s investment landscape in recent years.

The stellar performance has been driven largely by the Mansa-X Special KES Fund, which leads this category with Sh87.2 billion under management. Launched in January 2019 by Standard Investment Bank, Mansa X was the first fund to be licensed by Kenya’s market regulator under the “special fund” category, pioneering a new investment approach that enables Kenyan investors to diversify their portfolios beyond local markets.

Nahashon Mungai, executive director of global markets at Standard Investment Bank and portfolio manager overseeing Mansa X, attributes the fund’s success to its multi-asset approach. “Our strong returns continue to be simply a function of a lot more assets being traded,” Mungai explained in an interview with African Business. The fund invests across equities, indices, exchange-traded funds, commodities, precious metals, fixed income and interest rate products in major global stock exchanges including New York, London, Frankfurt, and Hong Kong.

“Kenyans for a very long time were just restricted to local assets. We were the first fund to let you invest in shillings yet get exposure to, for example, a stock like Facebook or Alphabet,” Mungai noted, highlighting how Special Funds have democratized access to global markets for ordinary Kenyan investors who previously had limited options for international diversification.

Analysts say the surge in Special Funds indicates a growing preference for flexible investment structures that allow fund managers to diversify across asset classes beyond traditional mandates. Unlike conventional Money Market or Fixed Income Funds that are restricted to specific asset classes, Special Funds enjoy greater latitude in asset allocation, enabling portfolio managers to pursue opportunities across multiple markets and instruments while managing risk through sophisticated hedging strategies.

Fixed Income Funds Show Strong Momentum

Fixed Income Funds also posted strong momentum in the third quarter, rising 29 percent to Sh136.7 billion, or 20.1 percent of total assets. This impressive growth reflects investor appetite for instruments that offer higher returns than Money Market Funds while maintaining relatively lower risk profiles compared to equity investments.

Within this category, the NCBA Fixed Income Fund holding the biggest share at 28.4 percent, demonstrating the competitive advantage of funds backed by major banking institutions. Fixed Income Funds typically invest in government and corporate bonds with longer maturities than Money Market instruments, offering investors the opportunity to lock in attractive yields while benefiting from potential capital appreciation if interest rates decline.

The strong performance of Fixed Income Funds comes against a backdrop of relatively elevated government bond yields, which have made these instruments attractive to investors seeking predictable income streams. Kenya’s fiscal consolidation efforts and ongoing engagement with international creditors have maintained investor interest in government securities, despite periodic concerns about the country’s debt sustainability.

Equity and Balanced Funds Remain on the Margins

In stark contrast to the growth in other categories, Equity and Balanced Funds remained marginal players at 0.5 percent and 0.2 percent of AUM respectively, reflecting subdued risk appetite among retail investors amid elevated interest rates and inflation. The anemic performance of these categories underscores a broader challenge facing Kenya’s capital markets: the reluctance of domestic investors to embrace equity exposure despite the potentially higher long-term returns these assets can generate.

The Nairobi Securities Exchange has struggled to attract sustained investor interest in recent years, with lackluster corporate earnings, limited new listings, and competition from fixed-income instruments offering double-digit yields dampening enthusiasm for stock market investments. Until there is a sustained equity market rally or a significant compression in fixed-income yields, Equity and Balanced Funds are likely to remain niche products catering primarily to sophisticated investors with longer investment horizons.

Market Structure and Regulatory Landscape

The report shows the broader market continues to expand, with 55 licensed CIS operators and 234 registered funds, though only 41 are currently active. This gap between registered and active funds reflects both the competitive pressures in the industry and the challenges smaller fund managers face in achieving the scale necessary to operate profitably.

The market remains highly concentrated, with five major players dominating the landscape. Sanlam Unit Trust, Standard Investment Trust Fund, CIC Unit Trust, NCBA Unit Trust and Britam Unit Trust continue to be the market’s dominant forces. According to the data, the top five CIS operators managed a combined Sh432.6 billion, representing an impressive 63.7 percent of the market.

The concentration is even more pronounced when examining the broader competitive landscape. The data shows that 14 CIS each manage over Sh10 billion, collectively holding 90.1 percent of total AUM, while 12 CIS manage less than Sh1 billion, together accounting for just Sh3.2 billion. This bifurcation suggests that scale economies, brand recognition, and distribution capabilities create significant barriers to entry for smaller players.

The Capital Markets Authority has been actively working to deepen the market and enhance investor protection. In November 2025, the regulator approved eight new Collective Investment Schemes and sub-funds, bringing the total number of approved schemes to 57. CMA Chief Executive Officer Wyckliffe Shamiah noted that these approvals reflect growing investor confidence and increased appetite for diversified investment options.

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Asset Allocation Patterns Reveal Conservative Positioning

The CMA data provides revealing insights into how fund managers are positioning their portfolios. Government securities remain the largest allocation, representing 45.6 percent (Sh309.6 billion) of total AUM. This heavy weighting toward government paper reflects both the attractive yields available on Treasury bills and bonds, as well as the perceived safety of these instruments backed by the full faith and credit of the Kenyan government.

Other allocations include listed securities at 1.7 percent, cash and demand deposits at 9.2 percent, unlisted securities at 2.5 percent, offshore listed investments at 4.0 percent, and alternative investments comprising the remainder. The relatively small allocation to listed equities (1.7 percent) underscores the earlier observation about subdued investor appetite for stock market exposure, while the growing allocation to offshore investments reflects the impact of Special Funds introducing global diversification options.

Macroeconomic Context Driving Investment Flows

The surge in CIS assets comes against a complex macroeconomic backdrop that has shaped investor behavior and fund manager strategies. Kenya’s economy has demonstrated resilience despite global uncertainties, with GDP growth expected to reach approximately 4.5 percent in 2025 according to World Bank projections. However, this growth has occurred alongside persistent inflation concerns, elevated interest rates, and fiscal pressures that have created both challenges and opportunities for the investment management industry.

The Central Bank of Kenya has maintained a relatively accommodative monetary policy stance, with recent rate cuts aimed at stimulating credit growth while managing inflation expectations. This delicate balancing act has created an environment where investors seek vehicles that offer protection against inflation while maintaining liquidity—a sweet spot that Money Market and Special Funds have successfully occupied.

Inflation pressures, though moderating from earlier highs, remain a key consideration for investors. The search for real returns—nominal returns adjusted for inflation—has driven interest in funds that can deliver performance above the inflation rate without exposing investors to excessive volatility. Fixed Income and Special Funds, with their ability to capture higher yields than traditional Money Market instruments while managing downside risk, have benefited from this dynamic.

Digital Innovation Driving Accessibility

A significant factor in the CIS market’s expansion has been the digital transformation of investment platforms. Leading fund managers have invested heavily in mobile applications and digital interfaces that make investing accessible to a broader population. Sanlam’s Money Market Fund app, for example, offers self-onboarding, M-Pesa deposits, instant transaction initiation, and downloadable statements, while NCBA’s platform enables same-day withdrawals for requests submitted before 10 AM.

The integration with M-Pesa, Kenya’s ubiquitous mobile money platform, has been particularly transformative. Investors can now fund their accounts, track performance, and initiate withdrawals directly from their phones without visiting physical branches or filling out paper forms. This convenience has democratized access to sophisticated investment products that were once the preserve of wealthy individuals and institutions.

The success of digital platforms has inspired further innovation. In December 2024, a new M-Pesa integrated Money Market Fund called Ziidi MMF was launched, allowing M-Pesa customers to invest as little as KES 100 directly from their mobile wallets with free deposits and withdrawals. While its returns currently trail other funds, the accessibility it offers could draw millions of new investors into the CIS ecosystem.

Growth Drivers and Market Dynamics

The CMA report attributes the market’s expansion to several factors working in concert. Improved performance among existing funds has created a virtuous cycle, as strong returns attract new investors whose capital inflows enable fund managers to capture economies of scale that further enhance performance. The entry of new products under established umbrella schemes has expanded choice for investors, while intensified marketing and investor education by fund managers has raised awareness about the benefits of collective investment schemes.

The marketing efforts have been particularly important in a market where financial literacy remains a challenge. Fund managers have invested in investor education programs, financial literacy workshops, and digital content explaining investment concepts in simple terms. This effort to demystify investing and demonstrate how even modest regular contributions can compound into significant wealth over time has resonated with Kenya’s growing middle class.

The low minimum investment requirements offered by many funds—ranging from as little as Sh100 to Sh5,000 for initial deposits—have removed barriers to entry that previously excluded many potential investors. This accessibility, combined with the convenience of mobile platforms and the backing of trusted financial institutions, has created a compelling value proposition for Kenyans seeking alternatives to traditional bank savings accounts that offer minimal real returns after accounting for inflation.

Competitive Dynamics and Market Leadership

The battle for market leadership among CIS operators has intensified, with Sanlam recently overtaking CIC as the largest fund manager. Sanlam Unit Trust Scheme registered a 44 percent growth in assets under management in the first three months of 2025, reaching Sh90.2 billion and capturing 18.2 percent market share, compared to CIC’s Sh87.5 billion and 17.6 percent share. Industry sources attribute Sanlam’s ascent to its success in attracting large institutional clients and its aggressive expansion of product offerings.

The competition among the top five operators—Sanlam, CIC, Standard Investment Bank, NCBA, and Britam—has driven improvements across the industry. These firms compete not just on performance and fees, but also on service quality, digital capabilities, and brand reputation. The rivalry has pushed all major players to enhance their offerings, ultimately benefiting investors through better products, lower costs, and improved service delivery.

Standard Investment Bank, through its Mansa X Special Fund, has carved out a distinctive niche by offering Kenyan investors unprecedented access to global markets. The bank’s expertise in global markets and its willingness to introduce innovative products has disrupted traditional fund management approaches and forced competitors to expand their own offerings or risk losing market share to more innovative players.

Regional and Global Context

Kenya’s CIS market development should be viewed within the broader context of East Africa’s evolving financial landscape. While Kenya leads the region in CIS sophistication and scale, neighboring markets including Tanzania, Uganda, and Rwanda are also developing their own collective investment ecosystems. Kenya’s experience provides valuable lessons for these markets, while competition from regional financial centers keeps Kenyan fund managers focused on innovation and performance.

Globally, the growth of Kenya’s CIS market aligns with broader trends in emerging markets where rising incomes, improving financial infrastructure, and growing financial literacy are driving expansion in professionally managed investment products. However, Kenya’s market remains small by international standards, suggesting significant room for further growth as the economy develops and more Kenyans participate in formal financial markets.

Looking Ahead: Opportunities and Challenges

Overall, the CIS industry grew 14 percent between June and September, underscoring its rising importance in mobilizing domestic savings during a period of tight financial conditions. This growth trajectory appears sustainable given several supportive factors including Kenya’s young and growing population, increasing urbanization, rising incomes among the middle class, improving financial literacy, and the ongoing digital transformation of financial services.

However, challenges remain. The concentration of assets among a handful of large fund managers raises questions about competition and market efficiency. The minimal allocation to equities suggests that fund managers and investors have not yet fully embraced the long-term wealth-creation potential of stock market investing. Regulatory oversight must evolve to keep pace with product innovation, particularly as Special Funds introduce more complex strategies and international exposures that may not be fully understood by all investors.

The sustainability of current returns is another consideration. As competition intensifies and more funds chase similar opportunities, maintaining the attractive yields that have drawn investors to these products may become more challenging. Fund managers will need to continue innovating, finding new sources of returns, and managing costs to deliver value to investors in an increasingly competitive marketplace.

The macroeconomic environment will also play a crucial role. Sustained economic growth, controlled inflation, stable interest rates, and continued progress on fiscal consolidation would support further CIS expansion. Conversely, economic shocks, political instability, or renewed fiscal pressures could dampen investor enthusiasm and slow the market’s growth trajectory.

Despite these challenges, the outlook for Kenya’s CIS market remains broadly positive. The structural drivers of growth—demographic trends, improving financial inclusion, digital innovation, and growing investor sophistication—remain firmly in place. As more Kenyans recognize the benefits of professionally managed investment products that offer superior returns to traditional savings accounts while providing liquidity and diversification, the CIS market is poised for continued expansion in the years ahead.

The dramatic rise of Special Funds and the gradual shift away from exclusive reliance on Money Market instruments signal a maturing market where investors increasingly demand and fund managers increasingly deliver sophisticated solutions tailored to diverse investment objectives. This evolution, supported by enlightened regulation and sustained innovation, positions Kenya’s CIS market for a bright future as a key pillar of the country’s financial system and an important vehicle for mobilizing domestic savings to support economic growth.

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By: Montel Kamau

Serrari Financial Analyst

2nd December, 2025