The Capital Markets Authority issued a warning to managers of special funds, a fast-growing segment of collective investment schemes, about promises of high returns without proper risk disclosure.
On July 2, the regulator met privately with fund managers to discuss concerns over unethical marketing, including the use of social media influencers to promote these investments without transparency or proper qualifications.
Regulator flags misleading marketing tactics
Special funds now account for 23.9% of Kenya’s collective investment schemes, valued at Sh203.5 billion as of March 2026. These funds allow investment across various assets like equities, real estate, private equity, and commodities. While their flexibility can lead to strong returns, it also increases exposure to risks.
Fred Mburu, CEO of the Fund Managers Association, confirmed the meeting but stated his organization did not participate. He explained that the discussions centered on whether clients grasp the risks and strategies involved, as well as how returns and net asset values are reported. “Marketing ethics were also raised, particularly when intermediaries like influencers promote these funds on behalf of managers,” Mburu said.
These funds charge annual fees of up to 6% of assets, along with performance fees when returns exceed benchmarks. The CMA is considering new regulations to address concerns, including potential fraud. In May, a Nairobi court permitted the Directorate of Criminal Investigations to detain a man accused of defrauding investors of Sh33.6 million through a cloned investment platform.
Related: Ghana-Togo border fish trade evades customs
Investors seek higher returns amid low interest rates
The rise in special funds reflects a shift among Kenyan investors away from traditional options like money market funds and fixed-income products. While money market funds grew only 4% in the first quarter of 2026, special funds expanded by 25%.
The regulator linked this growth to increased retail investor interest and the introduction of new products. In its latest report, it noted strong public demand for fund management, particularly in this segment.
The CMA cautioned that some managers may mislead investors by annualizing short-term returns, which can inflate performance figures. It also warned that short-term investors might face losses, as these funds are structured to reduce volatility over longer periods.
While no specific new rules have been announced, industry observers anticipate stricter disclosure requirements and closer oversight of marketing. For now, investors are advised to view promises of unusually high returns with caution.
Recent profit surges in other sectors show how market shifts can create both opportunities and risks.
