Special Funds in Kenya are experiencing accelerated growth, reflecting strong investor desire for higher returns and broader diversification beyond traditional Money Market Funds (MMFs). In the first half of 2025 (Q1–Q2), Special Funds grew by 31%. This expansion underscores increasing market adoption of alternative investment structures designed to enhance risk-adjusted returns.
Regulated by the Capital Markets Authority (CMA) since 2023, Special Funds provide investment managers with greater structural flexibility compared to traditional collective investment schemes. They allow for the creation of tailored, non-uniform products with expanded asset mandates.
Key Characteristics of Special Funds
1. Rapid Growth and Market Adoption
Special Funds have outpaced many traditional investment vehicles in growth and performance. As illustrated in the table below:
| Special Funds | ||
| Fund Manager | Name Of The Fund | Net Return % -tax |
| Arvocap Asset Managers | Arvocap Equity Special Fund (ZAR) | 22.59 |
| Standard Investment Bank (SIB) | Mansa X | 20.74 |
| Kuza Asset Managers | Kuza Momentum Special Fund | 20.62 |
| Faida Investment Bank (FIB) | Oak Fund | 18.99 |
| Old Mutual Investment Group | Old Mutual Special Fund | 14.50 |
| Etica Capital | Eticawealth fund | 14.20 |
| Madison Investment Managers | Madison Wealth Special fund | 12.08 |
The top performers were:
- Arvocap Equity Special Fund achieved returns of 22.59%, outperforming traditional low-risk instruments.
- Mansa-X recorded a return of 20.74% in 2025, demonstrating strong performance within a diversified mandate.
- Oak Special Fund delivered returns of approximately 18.99%, further illustrating the return potential within this category.
These returns significantly exceeded those of conventional MMFs and outpaced inflation during the same period.
2. Expanded Investment Mandate
Unlike MMFs, which are primarily restricted to short-term, low-risk instruments such as Treasury Bills and high-grade commercial paper, Special Funds are permitted to invest across a broader range of asset classes, including:
- Global equities (e.g., exposure to indices such as the S&P 500 and companies such as NVIDIA)
- International blue-chip stocks
- Commodities and metals, including gold and oil
- Derivatives, used for hedging and tactical positioning
- Alternative and structured investment products
This expanded mandate provides unrivalled asset versatility and allows managers to allocate capital beyond domestic fixed-income markets.
3. Risk–Return Profile
Special Funds are designed as higher-risk, higher-return vehicles. Their flexibility enables managers to capitalize on market volatility and global opportunities; however, this also introduces additional risks, including:
- Liquidity risk
- Credit risk
- Market volatility risk
- Foreign exchange exposure
As such, these funds are generally more suitable for investors with medium- to long-term horizons and higher risk tolerance.
Performance Differentiation: MMFs vs Special Funds
In 2025, the performance divergence between traditional MMFs and Special Funds widened considerably. While MMFs remained constrained by declining yields in short-term government instruments, Special Funds leveraged global equity exposure, commodities, and alternative allocations to generate superior returns.
By incorporating diversified global assets and tactical instruments, Special Funds demonstrated their ability to:
- Outperform inflation
- Deliver stronger capital appreciation
- Provide broader portfolio diversification
The rapid growth of Special Funds signals a structural shift in Kenya’s investment landscape. As investors seek enhanced returns in a moderating interest-rate environment, these vehicles offer an attractive complement to traditional fixed-income portfolios.
However, due consideration must be given to the associated risk profile. Appropriate allocation should be aligned with individual risk tolerance, liquidity needs, and long-term financial objectives.
