Kenya’s KSh 600 Billion Milestone: CMA Unlocks New Wave of Investment Schemes Amid Market Liquidity Shift

The Capital Markets Authority (CMA) has taken a definitive step to deepen Kenya’s financial markets, announcing on November 26, 2025, the official approval for the establishment of eight new Collective Investment Schemes (CIS) and associated sub-funds. These approvals, granted in strict adherence to the Capital Markets Act and the Capital Markets (Collective Investment Schemes) Regulations, 2023, mark a pivotal moment in the evolution of investment products available to both retail and institutional investors in the East African nation. The move is central to the Authority’s strategic objectives to foster product diversification, enhance investor protection, and ultimately expand regulated avenues for national savings.

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The strategic importance of this development was highlighted by CMA Chief Executive Officer Wyckliffe Shamiah, who noted that the continued growth of CIS products is directly driving national savings and investment. Crucially, Shamiah confirmed that the total assets under management (AUM) in the CIS industry have surpassed the KSh 600 billion threshold, cementing the sector’s role as a major financial intermediary. This figure represents an unprecedented surge in pooled investment vehicles, demonstrating both the growing sophistication of the Kenyan investor base and the compelling yields offered by non-traditional banking products. The latest approvals lift the total number of registered CIS in Kenya to 57, significantly widening the scope of regulated investment choices available to the public.

The Regulatory Imperative: Driving Product Diversification

The Capital Markets Authority (CMA) views these approvals as more than just routine administrative tasks; they are a direct fulfillment of its mandate to facilitate market development while ensuring robust regulatory compliance and investor safety [source: https://www.google.com/search?q=businessdailyafrica.com/bd/opinion-analysis/columnists/cma-must-focus-on-investor-protection-in-digital-era-4009664]. The new funds introduce variety across several asset classes and currency denominations, tackling the historical concentration risk within the Kenyan financial system.

The newly approved schemes and sub-funds include:

Prior to this major announcement, the Authority had already demonstrated its commitment to deepening the offerings, having recently approved Sanlam Investments East Africa to establish the Sanlam Special GBP Fixed Income Fund [source: the-star.co.ke/business/2025-10-15-cma-approves-sanlams-gbp-fixed-income-fund/], targeting investors with liabilities or interests denominated in British Pounds. Similarly, ALA Capital Limited registered the ALA Capital Collective Investment Scheme (ALA CIS) with six sub-funds, and VCG Asset Management Limited secured approval for three funds under the VCG Offshore Opportunities Special Funds umbrella.

The underlying definition of a CIS is simple yet powerful: an investment fund that pools money from many investors [source: cma.or.ke/index.php?option=com_content&view=article&id=16&Itemid=125] and utilizes a professional investment manager to deploy these pooled contributions across a diversified range of assets. The core benefits—risk spreading, professional management, and diversification—are now being applied across a wider spectrum of market opportunities, pushing investment beyond traditional savings accounts and into sophisticated debt and equity instruments.

Macroeconomic Tailwinds: The Pursuit of Real Returns

The explosive growth of the CIS sector, culminating in the KSh 600 billion AUM landmark, is not accidental; it is fundamentally driven by macroeconomic conditions that have pushed investors away from conventional banking products and toward higher-yielding, liquid alternatives.

Firstly, the persistent inflationary pressure in Kenya, driven by factors such as volatile food and fuel prices, [source: https://www.google.com/search?q=businessdailyafrica.com/bd/economy/inflation-slows-to-5-8-on-easing-food-prices-4034870] has forced savers to seek instruments that offer positive real returns (i.e., returns that outpace inflation). As the Central Bank of Kenya (CBK) maintains a cautious stance on its benchmark rate to anchor inflation, the yields on government debt—particularly Treasury Bills and Bonds—have remained highly attractive.

Secondly, the success of recent CBK debt auctions, which have seen Treasury Bills oversubscribed for multiple consecutive weeks [source: standardmedia.co.ke/business/article/2001479815/cbk-t-bills-oversubscribed-as-investor-appetite-remains-high], provides a clear signal of market liquidity and demand for risk-free government paper. Money Market Funds (MMFs), which constitute the largest component of CIS assets, are the primary beneficiaries of this demand, as they pool retail funds to access these high-yield T-Bills and corporate debt, which might otherwise be inaccessible to individual investors. Funds like the Swala Money Market Fund and Wekeza Money Market Fund are capitalizing directly on this arbitrage between high government yields and lower commercial bank deposit rates.

Thirdly, the increasing competition among fund managers, evidenced by the proliferation of new funds and schemes, has led to a reduction in management expense ratios (MERs) and increased transparency, making these products more appealing to the mass market. This environment of high liquidity and high nominal yields is creating a virtuous cycle where growth in AUM enables managers to access even better institutional debt pricing, further enhancing returns for the individual investor.

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The Dollarization Trend: Hedging Currency Risk

Perhaps the most significant strategic development embedded within these approvals is the proliferation of US Dollar (USD)-denominated funds. Schemes such as XENO Unit Trust Scheme and the various dual-currency funds under Capital A Rejesha Umbrella Collective Investment Scheme have received clearance to launch funds denominated in USD, including money market, fixed income, and equity options.

The decision by the CMA to approve funds like the XENO Kenya Money Market Fund (USD) and Globetec Dollar Fixed Income Fund is a direct response to prevailing currency volatility in the Kenyan Shilling (KES) market [source: https://www.google.com/search?q=reuters.com/markets/currencies/kenyan-shilling-hits-record-low-against-dollar-amid-debt-concerns-2024-02-14/]. For Kenyan investors, especially high-net-worth individuals and companies with future USD-denominated liabilities (e.g., school fees, import costs), these funds offer a crucial, regulated mechanism to hedge against currency depreciation without moving assets offshore.

Historically, retail investors seeking USD exposure were often forced to rely on informal channels or simply hold dollar cash. Now, they can access diversified, professionally managed portfolios, such as the XENO Kenya International Equity Special Fund (USD), which invests in global assets while mitigating local currency risk. This institutionalizes the dollarization of savings and provides a crucial stability layer for Kenyan investors concerned about their purchasing power. This regulatory flexibility also signals that the CMA is committed to ensuring that the domestic capital market offers alternatives that can compete with international wealth management platforms.

Deepening the Market: Specialised and Alternative Assets

Beyond the standard money market and equity offerings, the new approvals mark a clear trend toward specialized funds targeting alternative or less liquid asset classes. The inclusion of the Lofty-Corban Private Debt Special Fund and the Sanlam Multi-Asset Special Kenya Shilling Fund indicates a regulatory willingness to allow greater innovation in product design.

• Private Debt: The Private Debt Special Fund targets high-yield, less-liquid debt obligations, typically from private companies or structured credit products. This provides investors with access to the premium returns associated with private markets, diversifying risk away from publicly traded corporate bonds and government debt. This segment is particularly important in an economy where access to bank credit can be expensive or constrained [source: https://www.google.com/search?q=businessdailyafrica.com/bd/economy/private-sector-credit-growth-slows-to-6-in-september-3990664].
• Global Assets: The Lofty-Corban Global Assets Special Fund and XENO Kenya International Equity Special Fund (USD) are designed to channel domestic capital into international markets, including major global stock exchanges and debt instruments. This exposure is vital for Kenyan investors who might have exhausted diversification opportunities within the relatively shallow local market. By facilitating regulated access to global equities and bonds, the CMA promotes a more robust and resilient investment community.

The umbrella structure, such as that adopted by Capital A Rejesha, is also a significant technical advancement. It allows for the easy creation of multiple sub-funds under a single regulatory shell, offering investors seamless switching between different risk profiles (e.g., from a Money Market Fund to an Equity Fund) without complex new account registrations, significantly enhancing user experience and investor stickiness.

Looking Ahead: The Role of Technology and Financial Inclusion

The surge in CIS AUM to over KSh 600 billion underscores the growing role of fund management in financial inclusion [source: worldbank.org/en/topic/financialsector/brief/financial-inclusion-and-infrastructure]. Collective Investment Schemes, particularly MMFS, have become the preferred savings vehicle for tech-savvy Kenyans, driven by ease of access through FinTech platforms and mobile money integration. The investment process has been digitized, allowing individuals to deposit small, fractional amounts into a diversified portfolio from their mobile phones, bypassing the traditional friction of bank branches and paper-based applications.

CMA Chief Executive Wyckliffe Shamiah’s comments about these approvals reflecting the Authority’s commitment to facilitating market development resonate with the broader national agenda to foster a dynamic and resilient financial sector. The approvals encourage further financial deepening, which is essential for mobilizing long-term capital for infrastructure and private sector investment.

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However, the rapid growth also presents challenges:

1. Investor Education: As product complexity increases (e.g., multi-asset, private debt), the need for comprehensive investor education intensifies to ensure retail investors fully understand the risks associated with special funds and foreign currency exposure.
2. Regulatory Oversight: The CMA must maintain its vigilance. The proliferation of funds requires heightened scrutiny of the operational resilience and compliance frameworks of the new fund managers to prevent any breaches that could erode public trust, a trust that is inherently linked to the stability of the entire capital market.
3. Liquidity Risk Management: While MMFs are highly liquid, special funds investing in private debt or alternative assets carry inherent illiquidity risks. The CMA’s new regulations must ensure that fund managers are transparent about the redemption mechanisms and potential lock-up periods associated with these specialized products.

In conclusion, the approval of these eight new schemes, alongside the KSh 600 billion AUM milestone, marks a clear trajectory for Kenya’s capital market: moving from reliance on traditional banking and debt to a sophisticated, diversified investment landscape. By institutionalizing USD savings, promoting specialized debt, and providing seamless access to global assets, the CMA is actively positioning Kenya as the pre-eminent financial hub in East Africa, prepared to harness local savings for regional and international investment opportunities. The market’s success now hinges on maintaining the delicate balance between regulatory innovation and unwavering investor protection.

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By: Montel Kamau

Serrari Financial Analyst

4th December, 2025