CMA weighs new ratings for Kenya’s unit trust funds as assets near KSh1 trillion

Kenya’s Capital Markets Authority (CMA) is considering investment ratings for unit trust funds and their managers as the country’s collective investment schemes market approaches KSh1 trillion in assets, a move that could help millions of savers better understand the risks behind their investment choices.

The proposal targets a market that held KSh948.7 billion in assets under management as of June 30, 2026, across 66 approved collective investment schemes comprising 320 funds. The reported number of investors had reached 4.14 million, reflecting the growing role of unit trusts, particularly money market funds (MMFs), in the financial lives of Kenyans.

CMA chief executive Wycliffe Shamiah says the regulator receives frequent enquiries from investors seeking to establish whether particular funds are safe or offer better investment prospects. External ratings could give savers an independent assessment of the information published by fund managers, helping them compare investment risks rather than relying primarily on advertised returns.

“On a daily basis, we are getting a lot of enquiries from investors on the disclosures made by fund managers, asking whether one fund is good or another is safe,” Shamiah said. He added that the authority believes ratings, following the example of markets such as Nigeria, could help address these concerns.

Why the CMA wants independent fund ratings

The growth of Kenya’s unit trust industry has brought more retail investors into professionally managed investments, but the information used to assess these products can be difficult for ordinary savers to interpret. Fund managers publish details about returns and portfolio allocations, yet investors may lack the technical knowledge to determine how the underlying assets could perform under different market conditions.

The CMA has also cautioned some fund managers over the marketing of unrealistic returns, raising concerns about how investment opportunities are presented to customers. A rating system could provide another reference point for investors assessing claims made by fund managers and help distinguish a fund’s historical performance from the risks associated with its portfolio.

Kenya’s collective investment schemes market has expanded from KSh56.6 billion in assets under management in March 2018 to KSh948.7 billion in June 2026, an increase of nearly 17 times. Over a separate period, the reported investor count rose from 171,904 in March 2021 to 4.14 million in June 2026, illustrating how much wider participation has become.

Money market funds remain the most popular category, largely because they invest in cash and short-term instruments such as Treasury bills. However, the market now includes a wider range of products, including fixed-income, balanced, equity and specialised funds, each with different investment objectives and exposures.

What the ratings would assess

The proposed framework would examine both the risks attached to a fund’s investments and the capabilities of the company managing those assets. These are related assessments, but they answer different questions about the safety and management of an investment.

Fund ratings would consider the quality of underlying assets, the risk that a borrower could default, fluctuations in returns, foreign-currency exposure and the ability to sell investments to meet withdrawal requests. Liquidity is particularly important because a fund may hold assets that cannot be sold quickly without accepting a lower price, even when investors want to withdraw their money.

Manager ratings, meanwhile, would examine an asset management company’s investment processes, internal systems, personnel and governance capabilities. The track record of senior management and the expertise of the wider investment team would help inform an assessment of whether the company has the capacity to manage portfolios responsibly.

Special Funds may require additional scrutiny because their investment mandates can involve concentrated exposures, complex assets or borrowing. Assessments could examine cash flows generated by underlying investments, the availability of liquid assets and financial leverage, which can magnify losses when investments perform poorly.

A rating would give investors another tool for evaluating a fund, but it would not guarantee a particular return or eliminate the possibility of losses. Its usefulness would depend on the quality of the underlying information, the independence of the rating agency and how clearly the assessment explains the risks involved.

A broader market brings new risks

The expansion of specialised funds illustrates why a single assessment approach may not adequately describe every investment product. In August 2026, Absa secured approval for global multi-asset Special Funds denominated in Kenyan shillings and US dollars, while Britam launched funds targeting global equities and multi-asset exposure in October.

These products give investors access to investment opportunities beyond conventional domestic money market instruments, but they also introduce considerations such as foreign-market performance, currency movements and portfolio concentration. A fund denominated in shillings, for example, may still hold foreign assets whose value changes with exchange rates and international market conditions.

Special Funds have also become a substantial part of the local investment market. TechTrendsKE reported in August that assets in the category had risen 134.84% year on year to KSh203.56 billion in the first quarter of 2026, reflecting the scale of the category’s expansion.

Digital distribution adds another dimension to the investor-protection question. Safaricom launched its Sharia-compliant Ziidi Shari’ah money market fund on M-Pesa in October, bringing another regulated investment product to customers through a familiar mobile platform.

The ease of accessing a fund through a phone does not necessarily mean an investor understands its portfolio, liquidity arrangements or potential losses. Clear, accessible ratings could help bridge that gap by translating technical assessments into information that investors can use when comparing products.

How ratings could change investor protection

Independent ratings could also affect competition among fund managers. Companies with strong investment processes, transparent reporting and sound risk controls may be better positioned to demonstrate their capabilities, while weaker assessments could prompt managers to improve their disclosures or explain the risks associated with their portfolios.

Agusto & Co, the pan-African credit rating agency, supports the development of fund and investment manager ratings in Kenya. Group managing director Yinka Adelekan says the assessments could improve transparency and help investors make better-informed decisions about collective investment schemes.

The Fund Managers Association has also welcomed the proposal. Its chief executive, Fred Mburu, views ratings as a complement to the due diligence that professional managers already undertake, rather than a replacement for their responsibilities.

That distinction matters because ratings, audits, custody arrangements and regulatory supervision perform different functions. A rating agency evaluates risks within the scope of its methodology, while the CMA remains responsible for regulating the market and enforcing applicable requirements.

The cost of obtaining ratings will also matter to the industry, particularly if expenses are passed on to investors through fund charges. A useful framework would need to make assessments sufficiently comparable and accessible without imposing costs that undermine the returns investors receive.

Kenya’s approach to fund ratings

The CMA is looking at international approaches as it considers how to strengthen investor protection. Nigeria provides a regional example of a market that requires ratings for money market funds, with additional obligations for managers of specialised funds.

The United States and European Union take different approaches, relying on regulatory requirements for investment quality, portfolio management and disclosures rather than imposing a universal external-rating mandate on every unit trust. In the US, money market funds face specific rules governing eligible investments and liquidity, while fund managers must conduct independent credit assessments of their holdings.

The comparison highlights a policy choice for Kenya: whether external ratings should be compulsory across the market or encouraged as an additional safeguard. A mandatory approach could produce broader coverage, while a voluntary system would give managers more discretion but could leave investors without consistent assessments across all funds.

Kenya’s unit trust industry remains smaller than those of several other African markets. South Africa’s collective investment schemes held assets valued at KSh35.8 trillion at the end of March 2026, compared with KSh11.8 trillion in Morocco and KSh1.08 trillion in Egypt, according to the figures cited in the report.

Greater transparency could support confidence in Kenya’s investment products as the market expands, although ratings alone cannot account for the many factors that determine industry growth. Their practical value will rest on whether investors can understand the assessments, compare funds on a consistent basis and use the information to make decisions suited to their financial needs.

With assets under management approaching KSh1 trillion and millions of reported investors participating in collective investment schemes, the CMA’s proposal addresses a central challenge for Kenya’s retail investment market: making the risks behind financial products easier for ordinary savers to assess.

Go to TECHTRENDSKE.co.ke for more tech and business news from the African continent and across the world.

Follow us on WhatsApp, Telegram, Twitter, and Facebook, or subscribe to our weekly newsletter to ensure you don’t miss out on any future updates. Send tips to info@techtrendsmedia.co.ke