The increased demand for investment products that provide domestic retail investors to Kenya to be exposed to global financial markets is driving new growth for the country's banks. Standard Investment Bank (SIB), which offers Mansa X Special Fund to meet this demand, has emerged as one of the biggest players on this fast-growing corner of the market.
Mansa X, launched in January 2019, was the first fund approved by Kenya's market regulators under the “Special Fund” category. This allows investors to diversify their portfolios across local markets by investing in financial instruments on the world's leading global stock exchanges in New York, London, Frankfurt, Hong Kong and other financial centres.
The fund has grown rapidly since its inception, with its assets (AUM) exceeding many of the country's large traditional funds focused solely on domestic financial markets. According to data issued by Kenya's capital market regulator, Mantha X's AUM was Sh3.423 billion ($264 million) in September 2024, accounting for 10.8% of total assets managed by the domestic collective investment scheme. This brings the third largest managed fund in Kenya. It has assets worth Sh46.8 billion ($361 million) and accounts for 14.8% market share, with CIC Unit Trust managing Sh70.32bn ($540 million) and translated into 22.3% market share.
Earn investors influx
Nahashon Mungai, executive director of SIB's global markets, is the portfolio manager who oversees Mansa X. He tells African Business that the fund has captured a strong influx of investors in recent quarters and is continuing to maintain the pace of AUM's rapid growth that it has achieved in recent years.
“We currently manage Sh5.4 billion ($416 million),” he says. He says the fund's ability to consistently perform the domestic market is a major draw for investors. “The returns are good and we have managed an average fee of 17.5% over the past five years.”
In contrast, money market funds focusing on domestic assets such as government securities have earned much less returns.
The appeal of these funds is driven primarily by local interest rates. The current yield on Kenya's 364-day Treasury bill is 10.47%, following recent central bank fee cuts, making funds like Mantha X more attractive to Kenyan investors seeking returns.
“Our strong returns will continue to be a function of more assets that are traded,” says Mungai. The fund says it invests in stocks, indexes, ETFs (exchange trade funds), commodities, precious metals, bonds and interest rate products.
“All of these products tend to be better than fund managers who typically have access to one or two asset classes.”
“Kenyans have been limited to local assets for a very long time. We were the first funds that were able to touch stocks like Facebook and the Alphabet, for example. This created a lot of excitement,” he says.
He points out that the fund's ability to go longer and shorter is a key factor that allowed them to acquire consistent returns and maintain investors in a broader era of market turbulence.
Welcome competition
The rapid growth of Mansa X has encouraged more investment banks in Kenya to launch their own special funds, allowing investors to get in touch with the global market. Mungai is not worried about the prospect of increasing competition that this development represents.
“In the past year, more than five new special funds have been approved by the Capital Markets Bureau. I'm not worried about similar funds, which is finally being done by investment banks and fund managers.
FAIDA Investment Bank (FIB) was one of the new entrants with the Oak Special Fund, and recorded the rapid growth of its first year OUM.
Ian Kahangara, director of Global Markets and FIB's Chief Investment Officer, informs African businesses that the fund launched last February was closed at AUM in 2024 with SH927M ($7.2 million). This increased to Sh 1.4 billion ($108 million) in January and to 205 million ($15.8 million) in February.
“We have been very ambitious this year, and our targeted returns are 20% net net after the Kenyan Shilling Fund fees. That was our goal last year, reaching 29.38% and surpassing that,” he says.
Both the SIB and the FIB have introduced dollar-controlled special funds to capitalize on growing demand for investment products from overseas Kenyans and domestic investors making money from foreign currency.
Optimistic outlook
Looking forward to it, Kahangara is confident that the Oak Special Fund and the wider industry will continue to grow robustly.
He cites improving financial literacy and how Kenyans view money and investment as a major tailwind for the industry, particularly among middle-class and wealthy individuals. “We deal with knowledgeable, sophisticated clients, which are informed investors,” he says.
Mungai agrees to this assessment and notes that there was a time when real estate was the only game in town for local investors with risky surplus cash.
“If you didn't own the land or the house, you didn't see money wisely investing. But one thing people will notice when they're in an emergency is that it's not that easy to sell the land or bring your home to the market,” he points out.
“They realized there are other ways to make money and there are funds out there that they can work for you,” he said, explaining that this has led more retail investors to adopt portfolio investments and management funds.
“Initially, many people thought that the only people trying to understand this product were institutional investors. But it turned out that your average Kenyan ambitious middle class person knows similar funds that exist worldwide,” says Mungai.
Risk Management
Capital Markets Regulator has set a minimum investment requirement of Sh100,000 ($772) for special funds, except that investment banks accept funds from the public below this amount. However, the FIB and SIB have more stringent requirements. Oak's special fund requires a minimum investment of KSH 500,000 ($3,861), while Mansa X requires at least KSH 250,000 ($1,930).
This is to ensure that the distribution of these products is limited to sophisticated investors who understand the risks of investing in funds that employ complex trading strategies, such as leveraged and short sales.
Mungai believes that as financial literacy improves, regulators can reduce minimum capital requirements for special funds and allow more investment citizens to participate. “A sophisticated investor doesn't necessarily mean investors with money.
Mungay says the competition continues to beat investors as the industry is attracting new players. Investment banks and industry regulators need to maintain a laser focus on risk management. Fund managers should not chase returns at the expense of careful monitoring of risk and liquidity, he argues.
