I. Introduction to Equity Funds in Kenya

A. Definition and Purpose of an Equity Fund

An equity fund is a type of collective investment scheme (CIS) that pools money from multiple investors to purchase shares of companies listed on a stock exchange. In Kenya, these shares are traded primarily on the Nairobi Securities Exchange (NSE).

The goal of an equity fund is capital appreciation—growing investors’ wealth over time as the value of the underlying shares increases and dividends are reinvested. Unlike money market funds, which prioritize capital preservation and steady income, equity funds carry higher risk but also the potential for higher long-term returns.

Equity funds are particularly suitable for investors with a medium- to long-term investment horizon, who are willing to tolerate short-term volatility in pursuit of growth.

B. The Role of the Capital Markets Authority (CMA) as the Regulator

The Capital Markets Authority (CMA) serves as the statutory regulator overseeing all collective investment schemes in Kenya. It licenses fund managers, trustees, and custodians, ensuring that investor funds are managed according to transparent and legally enforceable standards. The CMA’s regulatory oversight is crucial in a market where information asymmetry and trust remain central challenges.

Through continuous monitoring, mandatory disclosures, and periodic audits, the CMA works to protect investors from malpractice, mismanagement, and fraudulent schemes. It also issues quarterly reports on the performance and size of Kenya’s collective investment market, offering a broad snapshot of sectoral trends.

C. Current State of the Equity Fund Market in Kenya

1. A Small but Vital Segment of the CIS Sector

Despite the central role of equities in wealth creation, equity funds constitute a relatively small portion of the total assets under management (AUM) in Kenya’s collective investment schemes. The majority of retail investors favor money market funds , which offer lower risk and more predictable returns. This skew reflects broader investor behavior in Kenya: a preference for liquidity and short-term stability over the uncertainty of stock market performance.

2. Challenges in Accessing Standardized Data

A key obstacle for investors evaluating Kenyan equity funds is the lack of standardized, comparative performance data. Fund managers publish fact sheets at different intervals and with inconsistent metrics—some report year-to-date returns, others use annualized figures, and many omit benchmarks altogether. This fragmentation makes it difficult for investors to make apples-to-apples comparisons across funds.

Moreover, while some managers provide detailed portfolio breakdowns and benchmark data (e.g., comparisons against the NSE All Share Index (NASI)), others remain opaque about their holdings or investment strategies. This underscores the importance of regulatory reforms aimed at improving transparency and establishing uniform reporting standards.

II. Key Criteria for Evaluating Equity Funds

When selecting an equity fund in Kenya, investors should go beyond marketing claims and examine several core criteria that determine a fund’s long-term performance and suitability. These include returns, fees, **manager competence **, and investment strategy. Each factor plays a distinct role in shaping an investor’s overall experience and outcomes.

A. Performance

1. Historical Returns

Past performance provides context for how the fund has behaved under different market conditions. Kenyan fund managers typically report 1-year, 3-year, 5-year, and since-inception returns. While short-term performance (such as 1-year returns) may reflect recent market cycles, longer horizons are more informative for assessing consistency and resilience.

2. Performance Relative to Benchmark

Every equity fund should be compared to an objective benchmark, such as the NSE All Share Index (NASI) or the * NSE 20 Share Index*. A fund consistently outperforming its benchmark—after accounting for fees—indicates genuine skill rather than luck or temporary market tailwinds.

3. Consistency of Returns

Volatile, erratic performance is a red flag. Consistency across different market environments demonstrates disciplined management and adherence to a clear investment philosophy. This can be evaluated by examining multi-period returns, rolling averages, and volatility measures (when available).

B. Fees and Charges

1. Management Fees

Most Kenyan equity funds charge annual management fees (typically between 2% and 3% of assets under management). While seemingly small, these fees compound over time and can significantly reduce net returns, especially in lower-growth years.

2. Initial Fees

Some funds impose front-end (entry) fees, deducted from your contribution before investment. For example, a 3% entry fee on a KSh 100,000 investment means only KSh 97,000 is actually invested. Investors should verify whether such fees exist and whether they’re justified by value-added management or advisory services.

3. Other Associated Costs

Hidden costs—such as custody, trustee, or exit fees—can also erode returns. Investors should always read the fund’s Information Memorandum and fact sheet carefully for a full breakdown of all charges.

C. Fund Manager Expertise and Reputation

1. Track Record of the Fund Management Team

The competence and experience of the fund manager directly influence performance. A manager with a proven record of navigating different market cycles (e.g., the pandemic downturn, 2022 bear market, and 2024 rally) is more likely to sustain performance in uncertain times.

2. Transparency in Reporting

A reputable fund manager publishes regular, detailed fact sheets, explaining performance drivers, portfolio composition, and key changes in holdings. Lack of transparency should be viewed as a warning signal, regardless of past returns.

D. Investment Strategy and Portfolio Composition

1. Stated Investment Philosophy

Equity funds differ in approach—some pursue growth stocks (companies with strong earnings potential), while others favor value stocks (undervalued firms with stable fundamentals). Understanding the fund’s stated philosophy helps align investor expectations with risk appetite.

2. Diversification Across Sectors

A well-managed equity fund should maintain exposure across key sectors of the Kenyan economy—such as banking, telecommunications, agriculture, and manufacturing. Concentration in a few large-cap stocks may amplify returns during rallies but also magnify losses during downturns. Evaluating the top 10 holdings can reveal whether diversification is adequate.

Evaluating an equity fund requires more than glancing at its latest returns. The key lies in understanding how the fund performs relative to its benchmark, how much it charges, the discipline of its management, and the robustness of its strategy. Investors who assess these criteria methodically are better equipped to identify funds that align with their long-term goals and risk tolerance.

III. Performance of Notable Kenyan Equity Funds (2023–Q2 - 2025)

Returns below are pulled from fact sheets and reports with non-uniform dates and methodologies. Treat them as directional, not synchronized. Where a manager doesn’t publish recent figures, I use AUM (as a scale proxy) and market context to infer risk/behavior, and I flag the gaps. Your baseline comparison remains the NSE indices over the same periods.

Old Mutual Equity Fund (Manager: Old Mutual Investment Group)

Old Mutual’s equity mandate is positioned for aggressive capital growth through active stock selection with a hard floor of 60% in equities and tactical use of cash/fixed income. As of Q2 2025, reported AUM ≈ KSh 642m, a meaningful scale for a pure equity vehicle in Kenya and consistent with net inflows following the 2024 rebound. The * *1-year return is ~18.9%**, with YTD ≈ 5% (inferred from manager charts). That profile—moderate positive YTD after a strong 2024—tracks a market that rallied hard then normalized.

Portfolio construction skews to Kenyan large caps, with Banks ~43.5% and Telecom ~16.5%—inevitably making * Safaricom and tier-1 banks* the key performance drivers. Risk is structurally high: the fund’s stated max drawdown ~ −4.47% over 24 months sounds modest for an equity fund; you need to verify the measurement window and methodology ( calendar months vs. peak-to-trough). Fee disclosure is thin in public collateral; assume ~2% p.a. management plus statutory taxes until a current IM/fact sheet confirms the schedule. Minimums are retail-friendly.

Why it stands out: A combination of top-quartile 1-year outcomes and above-peer AUM among pure equity funds. * What to watch:* Concentration risk in a few NSE bellwethers; fee drag in flat markets; verify whether the “60%+ equities” rule has resulted in meaningful cash lifts during sell-offs or simply residual cash.

Enwealth Equity Fund (Managed on platform with OMIG as fund manager)

Enwealth’s equity product shows clean disclosure and a balanced implementation: minimum 60% equities with the remainder in fixed deposits. As of Apr 2025, the fund reports +22.8% 1-year. Asset mix at snapshot was ~ 64% equities / ~36% deposits, with sector weights led by Banks and Telecom. That construction allowed the manager to harvest the 2024 equity rebound while muting volatility through carry on deposits in a high-rate environment.

Scale is small (AUM low tens of millions)—this cuts both ways. Smaller funds can be nimble and avoid market-impact costs, but liquidity and governance capacity are thinner. Fees: published ~2% p.a. management + VAT; no front-end load on the publicly available sheet. Risk language is “medium-to-high,” which is accurate given equity beta; the cited 24-month drawdown (≈−2.5%) again looks low—confirm methodology.

Why it stands out: Strong 1-year print, transparent factsheet, and explicit risk stats. Fragility: small AUM and a non-trivial deposits sleeve means performance can diverge from a strict equity benchmark—positive in drawdowns, negative in sharp equity melt-ups.

ICEA LION Equity Fund (Manager: ICEA LION Asset Management)

ICEA LION runs one of the largest equity mandates in the market by AUM (≈ KSh 1.0bn+). Size implies better operational resilience and potentially lower trading friction per unit, but it also pushes the portfolio toward highly liquid blue-chips—i.e., Banks and Safaricom—increasing benchmark correlation. 2023 was a stress test: the Kenyan market sold off sharply; large caps were hit (Safaricom, KCB down heavily). The fund recorded a full-year loss (≈ −11.1%), consistent with a portfolio that stayed substantially in equities and tracked the market’s leadership down.

Recent synchronized 1-year figures are not consistently posted on the public pages. Without them, you should avoid hard ranking. Expect any 2024-2025 rebound to mirror NASI more than niche stock pickers. Fees: typical equity-unit-trust levels (~2%)—confirm in the current IM. Risk: high; large-cap tilt makes single-stock factor risk (Safaricom) the main driver.

Why it stands out: Scale and market representativeness—useful for investors who want benchmark-like exposure with institutional governance. Caveat: do not infer manager “alpha” without apples-to-apples post-fee numbers versus NASI/NSE-20.

NCBA Equity Fund (Manager: NCBA Investment Bank)

NCBA’s equity fund is smaller by AUM (~KSh 100m+) and historically invested across NSE large caps. It posted a * valuation loss of ~11% in 2023*, which is consistent with broad-market damage and foreign-outflow pressure that year. Public web content cites fee guidance of ~2.5% p.a. management (confirm the current figure on the latest factsheet). Some media snippets throw around high single-digit to 30%+ returns in various windows—ignore them until you see theofficial 1-year number for the same end-date you’re using elsewhere.

Risk: high and largely systematic—expect outcomes to track NASI/NSE-20 barring strong tilts. Why it matters: credible brand, bank distribution, and straightforward mandate. Caveat: sparse, synchronized performance disclosure in public—request the latest factsheet before ranking.

Cytonn Equity Fund (Manager: Cytonn Asset Managers)

You get granular monthly attribution here, which is useful for diagnosing risk. The fund printed **−8.1% (Jul 2024) ** and −1.1% (Aug 2024), with management explicitly tying August’s loss to Safaricom −8.8%, partially offset byKCB +4.1%. That’s textbook concentration risk in a Kenya context: one mega-cap can dictate the P&L. Current AUM doesn’t appear in the top-scale tables; assume small.

Fees: equity-fund standard levels; verify in the IM. Risk: high, with idiosyncratic overlay if stock weights are punchy. Why it stands out: honest, specific attribution—good for investors who want to see how positions drive outcomes. Caveat: without a synchronized 1-year number, you cannot place it credibly in a ranked table.

Zimele Balanced Fund (Comparator, not a pure equity fund)

Zimele’s Balanced fund is a multi-asset product, not an equity fund, and should not be ranked alongside pure equities. It deserves mention because asset allocation—not stock-picking—drove its headline ~41.8% in 2024. The portfolio held ~20% equities at year-end, with the majority in fixed-income (e.g., fixed bonds) and cash-like call deposits, capturing high short-term rates while still participating in the NASI rebound. That combination produced an outsized result in a year when both bonds (via yield carry/price stability) and equities (via price recovery) helped.

Takeaway: Don’t confuse a balanced fund’s stellar single-year print with equity manager skill. The right comparison is a blended benchmark (e.g., T-bill + NASI + bond index), not NASI alone. Use case: investors prioritizing volatility control and rate carry rather than pure equity beta.

What the numbers actually say—and what they don’t

  • Returns tell you how the strategy mix + market regime interacted; they don’t reveal process quality by themselves.
  • AUM is a scale and liquidity proxy, not a performance predictor. Small funds can be nimble; large funds avoid capacity risk.
  • Risk disclosure (drawdown/volatility) varies. Be suspicious of drawdowns that look unnaturally low for equity mandates—check calculation windows and whether cash cushions inflated the optics.
  • Fees near 2–2.5% p.a. are common. In sideways markets, that’s a heavy hurdle; in rallies, less binding. Always compare post-fee to benchmark over like-for-like periods.
  • Data quality is the constraint. Before you publish a ranking, align end-dates, benchmarks, and **fee bases ** across managers, or your table is just noise.

Bottom line: If you must shortlist today using what’s verifiable, Old Mutual and Enwealth screen best on recent 1-year performance with clear mandates. ICEA LION is the scale play; NCBA and Cytonn need synchronized factsheets before any honest ranking. Zimele Balanced is an asset-allocation case study, not a peer.

IV. Risks and Considerations When Investing in Kenyan Equity Funds

Equity funds in Kenya can be powerful wealth-building tools, but they also carry structural and market-specific risks that every investor must understand before allocating capital. The most common errors made by retail investors—chasing recent performance, ignoring fees, or misunderstanding risk—stem from failing to evaluate these core dimensions objectively.

1. Market Risk

Kenyan equity funds are directly exposed to systemic market volatility on the Nairobi Securities Exchange (NSE). The market’s breadth is narrow—roughly a dozen large-cap stocks account for most trading volume—so sector shocks (e.g., in banking or telecommunications) can drag down nearly all funds simultaneously.

Key drivers:

  • Macroeconomic shocks: Exchange-rate instability, inflation spikes, and fiscal tightening directly influence investor sentiment.
  • Foreign investor flows: The NSE remains highly sensitive to foreign portfolio movements; large outflows depress prices even when domestic fundamentals remain sound.
  • Interest rate cycles: Rising local interest rates attract capital into money market funds and government securities, leading to equity sell-offs and valuation pressure.

Implication: Equity funds are unsuitable for investors needing liquidity within one to two years. Their performance hinges on long-term cycles rather than short-term stability.

2. Concentration and Liquidity Risk

The Kenyan stock market’s concentration magnifies single-stock risk. Safaricom and a few large banks often represent more than half of NSE market capitalization and dominate fund portfolios. A sharp decline in one of these counters can erase portfolio gains—even if the fund holds 20+ other positions.

Liquidity risk compounds this problem: the secondary market for mid- and small-cap shares is thin, meaning a fund manager cannot easily exit or rebalance large positions without moving the market price against them.

Implication: Investors should inspect a fund’s top 10 holdings and sector exposure. A fund claiming diversification but holding 50%+ in one sector is effectively taking concentrated bets disguised as diversification.

3. Information and Transparency Risk

The disclosure landscape for Kenyan collective investment schemes remains inconsistent. Many fund managers publish fact sheets irregularly, omit benchmark comparisons, or withhold detailed portfolio composition. This information asymmetry impedes genuine fund comparison and allows weaker managers to hide behind selective reporting.

While the Capital Markets Authority (CMA) requires periodic reporting, enforcement and standardization are still evolving. Investors must therefore conduct their own verification—checking for:

  • Consistent benchmark use (e.g., NASI or NSE 20).
  • Timely updates (preferably quarterly).
  • Explicit disclosure of fees and AUM changes.

Implication: A lack of transparency is itself a red flag. Investors should favor managers with clear, audited, and publicly available performance data.

4. Manager and Operational Risk

An equity fund’s returns depend heavily on the discipline, competence, and integrity of its management team. Misaligned incentives or weak governance structures can lead to poor execution or excessive risk-taking.

Operational risk also matters: custodial errors, delayed settlements, or compliance breaches can harm investors even when the fund’s stock selection is sound.

Implication: Verify that the fund manager is CMA-licensed, has an established track record, and publishes independent trustee and custodian details in its documentation. Avoid newly formed or opaque entities without verifiable oversight.

5. Currency and Inflation Risk

Although Kenyan equity funds are denominated in Kenya Shillings (KES), inflation and currency depreciation erode real returns. When the shilling weakens, imported inflation raises costs for local firms, and investors lose purchasing power—even if nominal fund performance is positive.

For investors planning to deploy or repatriate funds in foreign currencies, this becomes a direct source of loss. Unlike global equity funds, local ones rarely hedge currency exposure.

Implication: Equity funds are best suited for investors whose liabilities and expenses are in KES, not for those measuring returns in USD or EUR.

6. Behavioural and Timing Risk

Retail investors often buy into equity funds after a rally and exit during downturns—the exact opposite of rational behavior. This phenomenon, driven by recency bias and loss aversion, destroys long-term compounding.

Kenya’s equity cycles have been particularly sharp: losses exceeding 20% in 2023 were followed by strong rebounds in 2024–2025. Investors who exited prematurely locked in losses, while those who stayed invested recovered.

Implication: The only reliable way to capture equity fund gains is through long-term commitment—typically five years or more—and a disciplined approach to volatility tolerance.

7. Fee Drag and Return Dilution

Most Kenyan equity funds charge management fees of 2–2.5%, plus trustee, custodian, and administrative costs. In flat or modestly growing markets, these costs consume a disproportionate share of returns.

For example, in a year where gross returns are 10%, a 2.5% management fee plus taxes can cut the net gain to roughly 7%. Over a decade, this compounding effect can halve total accumulated value.

Implication: Always compare net returns (after fees) to the benchmark index. A fund that underperforms the NSE All Share Index post-fees adds no value, regardless of marketing claims.

8. Regulatory and Systemic Risk

While the CMA regulates collective investment schemes, Kenya’s capital market still faces systemic vulnerabilities:

  • Low retail investor literacy increases susceptibility to mis-selling.
  • Infrequent enforcement allows some managers to delay reports or manipulate pricing.
  • Economic policy uncertainty (taxes on capital gains, withholding rules) periodically alters the investment landscape.

Implication: Investors should monitor CMA circulars and quarterly reports, which highlight compliance and market integrity issues.

Equity funds are inherently volatile, but volatility is not the same as loss—it is the price of participation in long-term growth. The critical distinction lies in understanding, accepting, and managing that risk.

Investors who choose equity funds in Kenya must be ready for short-term turbulence, sector concentration, and * opaque reporting environments*. Those who treat these funds as long-term vehicles—rather than speculative bets—are the only ones positioned to realize their true potential.

V. Conclusion: Navigating Kenya’s Equity Fund Landscape with Clarity

Kenya’s equity fund market is both promising and underdeveloped—a paradox shaped by regulatory evolution, limited data transparency, and investor caution. For long-term investors seeking exposure to domestic growth, equity funds offer a disciplined entry point into the Nairobi Securities Exchange (NSE). Yet, their success depends not only on market performance but on the investor’s ability to interpret risk, fees, and strategy objectively.

The most consistent insight across all data is this: there is no “best” equity fund—only one that aligns with your goals and risk tolerance. A fund outperforming peers today may underperform next year if market conditions shift or if its sector exposures fall out of favor. The challenge for the investor is not to chase returns, but to evaluate * process quality, transparency, and consistency* over time.

In the years ahead, improving reporting standards, regulatory enforcement, and investor education will determine whether Kenya’s equity funds mature from niche products into mainstream investment tools. Until then, the disciplined investor—armed with patience and data literacy—remains the market’s only true advantage.