CMA Raises Concerns Over High-Return Investment Funds. What Aren’t Investors Being Told?

Kenya’s fast growing special funds market has come under closer regulatory watch after the Capital Markets Authority raised concerns over how some fund managers are marketing the products to investors. According to an exclusive report by Business Daily, CMA held a closed door meeting with special fund managers on July 2, warning against unethical marketing practices, including advertising high returns without giving investors enough information on the risks involved.

The concern comes as special funds continue to attract more retail investors looking for returns above those offered by money market funds, bank deposits and government securities. CMA’s latest Collective Investment Schemes report shows that assets in special funds rose to Sh203.5 billion by the end of March 2026, giving them a record 23.9% share of the unit trusts market.

Unlike traditional money market or fixed income funds, special funds have wider room to invest across asset classes such as listed equities, real estate, private equity, offshore stocks, commodities and other higher risk instruments. That flexibility can help generate stronger returns, but it also exposes investors to larger losses if the strategy performs poorly.

The regulator is reportedly concerned that some managers and intermediaries, including social media influencers, are focusing too much on headline returns while doing too little to explain the underlying investment strategy, fees, liquidity risks and the possibility of losses. This matters because some special funds charge management fees of up to six percent a year, plus performance fees when returns beat set benchmarks. There are also concerns over how returns are reported, especially where short term returns are annualised in a way that may make performance look more attractive.

A fund manager who spoke to Business Daily on condition of anonymity also raised concerns that some funds could be using new investor inflows to soften or conceal quarterly market losses. That concern has added to questions around how special funds value their portfolios, report returns and explain performance to clients.

The warning does not mean special funds are bad products. It means their rapid growth has raised the bar for transparency. As more retail investors chase higher returns, CMA wants fund managers to prove that clients understand not just the upside, but also the risks, costs and investment strategies behind the numbers.