Regulated special funds have invested most of their assets in overseas stocks such as Microsoft, Netflix, and Nvidia as fund managers take advantage of the continued market rally in advanced economies, especially the US, to seek higher returns for clients.
Fresh data by the Capital Markets Authority (CMA) shows that 44.1 percent of assets in special funds or Sh49.5 billion sat in offshore listed investments in the period ended June 2025.
Special funds are a type of collective investment scheme that offers greater flexibility in their investment strategy compared to traditional funds. They seek to maximise income by investing in high-yield options while protecting and growing investors' capital.
The special funds can, for instance, invest limitless cash in classes such as unlisted securities, offshore-listed investments, and offshore unlisted investments, which are capped at 20 percent, 10 percent, and five percent, respectively.
Alternative investments, which cover assets including currencies, indices, metals, commodities, and derivatives, are meanwhile capped at 10 percent for traditional funds.
Commercial bank deposits held the second-highest pool of cash from special funds at Sh18.7 billion or a share of 16.6 percent, ranking ahead of domestic Treasury bills and bonds, cash and demand deposits at Sh16.4 billion (14.6 percent) and Sh15.5 billion (13.8 percent) respectively.
The diversification of instruments by special funds has enabled managers to pay out a higher return to investors in contrast to traditional assets such as Treasury bonds and money market funds, whose yields have dropped since late 2024.
MansaX shilling-denominated special fund, for instance, had a net return of 4.89 percent and 6.05 percent in the opening two quarters of 2025, outpacing returns of 4.99 and 5.14 percent at the same time last year.
Oak Special Fund disclosed a return of 4.66 percent and 4.88 percent, respectively, over the same period, but the yields were lower than 15.4 percent and 6.78 percent in the opening two quarters of 2024.
Both funds revealed diverse holdings in their asset allocation, with top assets for the Oak fund being sovereign bonds, cash & cash equivalents, a mix of currencies, indices, metals and commodities, and international equities.
Top holdings for the Mansa X Kenya shilling fund, meanwhile, included the stocks of Netflix, Oracle, Nvidia, BAE Systems, and Microsoft.
The shilling-denominated Mansa-X was the most dominant special fund in the quarter, with a proportion of 57.4 percent of assets or Sh65 billion.
Other top special funds at the end of June included the NCBA KES Basket Note, the dollar-denominated Mansa-X Special Fund, Britam Special Fixed Income Fund, and the Oak Multi-Asset Special KES fund.
Special funds offer a high potential for returns but have potentially a greater risk of loss. They record mixed performances depending on their varied exposure, a contrast to traditional assets such as fixed income or money market funds, which mirror similar returns to investors.
Kuza Special Momentum Fund, closed last year with a performance of 45.9 percent but had delivered losses of 19.7 percent in 2023, revealing volatility for the investments.
The volatile nature of special funds means investments are typically targeted towards investors with a broader understanding of risks.
The special funds also often have a higher minimum investment amount compared to other types of pooled funds. The Dry Associates Special High Yield Kenya shilling fund, for instance, requires a minimum investment of Sh1 million and a Sh250,000 minimum top-up.
