Why Special Funds Are the New Standard for Kenya’s Serious Investors

The Kenyan investment landscape underwent a seismic shift in 2025. For years, the Money Market Fund (MMF) was the undisputed king of "safe" returns. However, with MMF yields cooling to single digits (averaging 9%), a new heavyweight has taken center stage: Special Funds.

Data from late 2025 shows Special Funds now control over Ksh 137.8 billion in assets. While the headlines scream about 20% returns, smart investors know that "reading the numbers" requires looking beyond the percentage sign.

1. The Yield Gap: Why Special Funds Are Leading

In 2025, the performance gap between traditional MMFs and Special Funds became a canyon. While MMFs are legally tethered to low-risk, short-term instruments like Treasury Bills, Special Funds can invest in a broader range of assets like stocks to deliver better returns.

This flexibility allowed funds like Mansa Shilling (20.74%) and Kuza Momentum (20.62%) to outperform inflation and traditional savings by significant margins. By including global equities and alternative assets, these funds captured the 52% dollar-term surge seen in the Nairobi Securities Exchange (NSE) and international bull runs that MMFs simply couldn't touch.

2. Net vs. Gross: The "Fee" Factor

When reading Special Fund performance, the most critical number isn't the return—it’s the fee structure. Unlike MMFs, which usually charge a straightforward management fee (2-3%), Special Funds often employ a "2 and 20" style structure or higher performance fees. In a year where a fund returns 20%, a high performance fee can significantly alter your actual take-home.

3. Diversification: Breaking the "Local Bias"

Standard MMFs are restricted by law to local, short-term debt like T-bills and bank deposits. If the local market stalls, your entire portfolio stalls. Special Funds offer Unrivaled Asset Versatility. They have the regulatory permission to move your capital beyond borders and traditional classes. A single Special Fund can hold:

• Global Tech & Blue Chips: Exposure to the S&P 500 or Nvidia.

• Commodities & Metals: Real-time hedges like Gold and Oil.

• Global Derivatives: Tools used to protect value when markets swing.

This isn't just "having more things" in your portfolio; it is Geographic and Asset-Class Sovereignty.

4.The Currency Shield

One of the most overlooked numbers in a portfolio is the Real Return. If your MMF pays 12% but the Shilling depreciates by 5%, your actual purchasing power only grew by 7%.

Serious investors are using Special Funds as a Currency Sovereign tool. By holding USD-denominated global assets (like S&P 500 ETFs or US Treasuries) within a Kenyan-regulated vehicle, you protect your wealth against local currency volatility. In 2026, the real "winner" isn't the person with the highest interest rate, but the person whose wealth is hedged against the Dollar.

The Verdict: How to Choose

Don't just chase the highest decimal point. When evaluating Special Funds in the Kenyan market:

1. Check the Asset Mix: Is it 100% local or globally diversified?

2. Verify the Lock-in: Can your lifestyle handle a 6-month wait?

3. Look for Hedging: Does the fund manager have a strategy for when the market turns red?

As the Kenyan market matures, Special Funds are no longer "niche." They are the new standard for serious wealth creation.

Disclosure:

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