CMA Must Not Fear High Returns; It Must Build A Market Where Kenyan Investors Can Win

Better returns are not the enemy. Hidden risk, weak disclosure, lazy regulation, and investor exploitation are.

The Capital Markets Authority is right to worry when investment products are marketed to ordinary Kenyans with loud promises of high returns but without equally loud warnings about risk. No responsible market can allow fund managers, influencers, agents or sales teams to shout returns and whisper losses. If a product carries liquidity risk, valuation risk, concentration risk, leverage risk, currency risk, private-market risk or drawdown risk, the investor must know before committing a single shilling. But the harder question is this: why does the regulatory conversation in Kenya often sound like a warning against ambition itself? Why does the language around special funds so easily become a suspicion of better returns, instead of a serious national conversation about how to build a capital market that actually rewards intelligent investing?

CMA has reportedly cautioned special fund managers against unethical marketing, poor material disclosures, unqualified sales representatives and the promotion of high returns without adequate information to clients. That concern is legitimate. The special funds segment has grown too large to be treated casually. According to reporting on the regulator’s latest engagement with the sector, special funds had reached KSh203.5 billion by the end of March 2026, accounting for 23.9 percent of collective investment schemes. CMA’s own Q1 2026 Collective Investment Schemes report also shows the broader CIS market at KSh851.7 billion, up 13 percent from KSh756.3 billion in December 2025, with 62 approved schemes, 285 funds and 43 active schemes. This is not a side market anymore. It is becoming a serious savings and wealth-building channel for households, professionals, entrepreneurs and institutions.

That is exactly why the debate must be framed properly. The problem is not that some fund managers are delivering stronger returns than traditional products. Kenya should not criminalise performance. A market where every product is forced to behave like a low-yield deposit account is not a capital market; it is a comfort blanket for mediocrity. The problem is when performance is advertised as certainty, when volatility is hidden, when fees are buried in fine print, when net returns are confused with gross returns, when past performance is sold as a promise of future income, and when retail investors are treated as deposits to be harvested rather than capital partners to be respected.

A serious regulator must be anti-fraud, anti-misrepresentation and anti-opacity. It must never be anti-return. There is a world of difference between an abnormal return and an intelligently earned return. An abnormal return with no explanation, no strategy, no audited valuation, no benchmark, no drawdown history, no independent custodian visibility and no liquidity discipline should invite scrutiny. But a better return produced by research, active allocation, disciplined risk management, access to multiple asset classes, global diversification and serious fund governance should be celebrated. Investors do not need a regulator that fears excellence. They need one that separates excellence from deception.

This is where CMA must move beyond warnings and build the right environment. Warnings may protect investors for a day, but architecture protects them for a generation. If Kenya wants retail investors to trust special funds, alternative funds, multi-asset strategies and other innovative products, the answer is not to scare the market back into the old corner. The answer is to create a disclosure regime that is simple enough for retail investors to understand and rigorous enough for sophisticated managers to respect. Every special fund marketed to the public should publish a standard investor factsheet showing the investment objective, strategy, asset allocation bands, benchmark, gross return, net return, all fees, performance fees, liquidity terms, redemption gates, valuation method, largest exposures, risk level, maximum historical drawdown and the identity of the fund manager, trustee and custodian.

That is not overregulation. That is market infrastructure. It is the financial equivalent of road signs, traffic lights and speed limits. The point is not to ban driving fast; it is to make sure the road is safe, the driver is qualified, the vehicle is roadworthy, and passengers know the journey they are taking. In the same way, a market that wants innovation must standardise disclosure, enforce honest marketing and punish deception quickly. It must license the right people, not merely register paperwork. It must make trustees and custodians active guardians of investor money, not ceremonial names printed in documents that nobody reads.

Kenya’s current investment market has a deeper trust problem. Too many investors have watched products carry the comfort of regulation while still leaving them exposed to opaque fees, weak communication, delayed redemptions, unexplained losses, conflicts of interest and confusing documents. That is why the public anger is understandable. When investors say many regulated products look questionable, they are not always speaking as technicians; they are speaking from experience, suspicion and fatigue. They are asking a valid question: what is the value of regulation if the investor only discovers the real risk after the money is already trapped, impaired or gone?

The answer cannot be defensive regulation. CMA should not respond to the rise of special funds by making high returns sound dirty. It should respond by making the market clean enough for high-quality returns to stand on their own merit. That requires a performance reporting code that forces every manager to report returns on a comparable basis: net of fees, time-weighted where appropriate, benchmarked against a relevant index or blended benchmark, and accompanied by volatility and drawdown data. It also requires strict rules against guaranteed-return language unless the guarantee is legally backed, funded and fully disclosed. If a fund is taking equity-like risk, it should not be marketed like a fixed deposit. If a product has redemption constraints, investors should not hear about liquidity only when they want their money back.

CMA should also formalise the role of investment promoters in the digital age. The regulator is right to worry when influencers, sales agents and content creators market financial products they may not understand. But again, the solution is not to silence the digital market; it is to professionalise it. Anyone paid to promote a regulated investment product should disclose that payment, use approved factsheets, avoid personal return guarantees, and pass a basic market-conduct certification. Kenya cannot pretend that retail investors are not discovering financial products on X, TikTok, podcasts, WhatsApp groups and YouTube. Regulation must meet investors where they are, not where old rulebooks wish they still were.

The law already provides a foundation. The Capital Markets (Collective Investment Schemes) Regulations, 2023 apply to schemes that pool funds from the public or by private arrangement, and they prohibit the establishment, operation or advertising of a collective investment scheme unless the scheme is approved, the relevant person is licensed, and the advertisement complies with the rules. That is a strong legal base. But a legal base is not the same as a living market. The real test is whether the regulator can enforce the rules fast enough, transparently enough and fairly enough to protect investors without choking innovation.

Kenya needs a capital market that rewards intellectual investment. That means rewarding research, data, patience, risk pricing, strategy, sector knowledge, global allocation and professional discipline. It means giving retail investors access to well-governed products beyond the traditional menu of money market funds and government-paper-heavy portfolios. It means building regulated routes into private debt, infrastructure finance, commodities, offshore assets, exchange-traded products, structured credit, venture exposure and professionally managed multi-asset strategies. It means accepting that Kenyans do not save merely to preserve money; they invest to grow it.

A poor country cannot regulate itself into wealth by fearing returns. A young professional saving KSh5,000 a month, a small business owner trying to protect working capital, a parent building an education fund, a chama pooling savings, or a pensioner trying to beat inflation does not need lectures that better returns are suspicious by default. They need honest products, competent managers, transparent risk, fair fees, enforceable rights and a regulator that expands opportunity while policing abuse.

This is the balance CMA must strike. It must be tough on fraud, clones, fake portals, unlicensed operators, misleading advertisements, lazy trustees, conflicted managers and salespeople who sell products they cannot explain. But it must be equally aggressive in opening the market to credible innovation. Approvals should be faster where managers meet high governance standards. Disclosures should be digital, comparable and readable. Investor complaints should be resolved with urgency. Enforcement actions should be public enough to educate the market. Market data should be accessible enough to let analysts, journalists and investors interrogate performance independently.

The worst outcome would be a market where regulation protects investors from opportunity while failing to protect them from actual abuse. That would be the tragedy. Kenya does not need a capital markets culture built on fear. It needs a capital markets culture built on trust, transparency, competence and ambition. CMA should warn where warning is necessary, but the larger national duty is to create an environment where legitimate managers can produce strong returns, investors can understand the risk they are taking, and retail capital can finally participate in the wealth created by disciplined intellectual work.

Better returns are not immoral. Better returns are not automatically a scam. Better returns are the reason capital markets exist. The regulator’s job is not to flatten ambition into average performance. The regulator’s job is to make sure ambition is honest, risk is disclosed, fees are fair, custody is secure, valuations are credible, managers are accountable, and investors are treated as citizens building wealth, not targets waiting to be harvested. If CMA gets that right, special funds will not be a threat to the market. They will become proof that Kenya can build a financial system where ordinary investors are not merely warned about risk, but given the tools, platforms and protections to win.

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