Unit Trusts in Kenya: How They Work, Top Funds, and How to Get Started

What Exactly Is a Unit Trust?

A unit trust — also called a collective investment scheme — is a fund that pools money from many individual investors. A professional fund manager uses that pooled money to buy a portfolio of assets: government T-bills, bonds, listed shares, bank deposits, or property, depending on the type of fund. As an investor, you own a slice of that portfolio in the form of units.

Each unit has a price called the Net Asset Value (NAV). The NAV is calculated daily by dividing the total value of the fund's assets by the total number of units outstanding. If a fund holds bonds and T-bills worth KES 500 million and has issued 50 million units, each unit is worth KES 10. When the underlying assets earn interest or grow in value, the NAV rises — and so does the value of your units.

Your returns come in two ways: the NAV grows over time (capital gain when you sell your units), or the fund distributes income as dividends or interest payments. Different fund types use different models — money market funds, for example, typically credit your account daily.

Unit trusts in Kenya are regulated by the Capital Markets Authority (CMA). Any fund manager you deal with should be licensed and listed on the CMA register at cma.or.ke. Check before you invest — this is not a step to skip.

The Four Types of Unit Trusts in Kenya

Not all unit trusts work the same way. The type determines what the fund invests in, how much risk you are taking, how quickly you can access your money, and what kind of return to expect.

1. Money Market Fund (MMF)

This is the most popular type of unit trust in Kenya, and for most beginners it is where you should start. A money market fund invests in short-term, low-risk instruments: Treasury bills (T-bills), bank fixed deposits, and commercial paper issued by creditworthy companies.

• Risk: Very low. Capital is almost always preserved.
• Returns: Typically 11–16% per annum in the current rate environment (2024–2026). The rate moves with the CBK base rate and T-bill yields, so it is not fixed.
• Withdrawals: Usually processed within 24–72 hours on business days.
• Best for: Emergency funds, short-term savings, money you might need within the next 12 months, or cash you are parking while deciding where else to deploy it.

An MMF earns significantly more than a standard bank savings account — often four to six times more — without meaningfully more risk. For most salaried Kenyans who currently hold their savings in a bank account earning 2–4% per year, switching to an MMF is one of the highest-return, lowest-effort decisions available.

2. Bond / Fixed Income Fund

A bond fund invests primarily in medium- to long-term government bonds and, in some cases, corporate bonds. These instruments pay a fixed coupon rate over their life. Returns are higher than an MMF but the fund's NAV can fluctuate slightly when interest rates move — if rates rise, existing bond prices fall, temporarily reducing the fund's value before recovering.

• Risk: Low to medium.
• Returns: 12–16% per annum, depending on bond market conditions.
• Investment horizon: 1–5 years is appropriate. Avoid this fund if you need the money within 6 months.
• Best for: People saving toward a specific goal 1–3 years out — a deposit on a house, school fees, or building a business emergency fund.

3. Equity and Balanced Funds

An equity fund invests in shares listed on the Nairobi Securities Exchange (NSE). A balanced fund holds a mix of shares and bonds, varying the ratio to manage risk. These funds can deliver the highest long-term returns, but they can also lose value in the short term if the stock market falls.

• Risk: Medium to high. Your unit value can go down, sometimes significantly, in a bad year.
• Returns: Variable. Over 5+ year periods, Kenyan equity funds have historically returned 10–20% per annum, but individual years can be negative.
• Investment horizon: 5 years minimum. Ideally 7–10 years. Do not put money here that you cannot afford to leave untouched through a downturn.
• Best for: Long-term wealth building — retirement savings, a child's university fund, or any goal that is far enough away that you can ride out market cycles.

4. Real Estate / Property Funds

Some fund managers offer property funds that invest in Real Estate Investment Trusts (REITs) or directly in property portfolios. Returns come from rental income and property price appreciation. These are less liquid than MMFs and bond funds, and the Kenyan REIT market is still developing. Unless you specifically want real estate exposure, most retail investors in Kenya are better served by the first three categories.

Who Are the Fund Managers in Kenya?

Several CMA-licensed fund managers operate in Kenya. Below are the most established ones — this is not an endorsement, and you should review each firm's current returns, fees, and fund size before committing money.

Before choosing, verify that the fund manager appears on the CMA public register. This takes two minutes and protects you from unlicensed operators. The CMA register is at cma.or.ke.

How to Compare Funds: What the Numbers Actually Mean

Every fund manager publishes performance data. Here is how to read it without being misled.

Annual return — look at multiple time periods

A fund that returned 18% last year is not necessarily better than one that returned 14%. Check the 1-year, 3-year, and 5-year annualised returns. Consistent 13–15% over five years beats a single standout year followed by two bad ones. The CMA publishes comparative fund returns — use those rather than relying solely on what the fund manager's own marketing says.

Total Expense Ratio (TER)

The TER is the annual fee deducted from the fund's assets, expressed as a percentage. For most Kenyan unit trusts it sits between 1% and 2.5% per annum. Lower is better. A TER of 2.5% versus 1.5% means an extra 1% of your money disappears each year in fees — compounded over five years, that gap is material. Always check the fund's Information Memorandum or ask the fund manager directly.

Minimum investment

Most Kenyan money market funds accept a minimum of KES 1,000 to KES 5,000 to open an account, with subsequent top-ups often as low as KES 500. A high minimum is a signal that a fund is targeting institutional investors rather than retail ones.

Withdrawal terms

For MMFs, expect 24–72 hours on business days. Bond funds may take 3–5 business days. Equity funds can take up to 7 business days. Understand this before you need emergency cash.

Fund size

Larger funds are generally more stable — they can absorb redemptions without having to sell assets at unfavourable prices. A very small fund (below KES 500 million in assets under management) can be more volatile and may have higher effective costs. Ask the fund manager for current AUM figures if they are not published.

How to Open a Unit Trust Account in Kenya

The process is straightforward. Most fund managers now allow online account opening — you do not need to visit an office.

1. Choose a fund manager. Verify they are on the CMA register. Compare TER and recent returns across at least three providers before deciding.
2. Download or access the account opening form. Most providers have this on their website or app. Some require you to visit a branch; many now accept everything digitally.
3. Upload your documents: national ID (both sides), KRA PIN certificate, and your bank account details for future withdrawals. Some providers also require a passport photo.
4. Transfer your initial investment. Most providers accept M-Pesa Paybill, bank transfer, or both. Confirm the correct Paybill number directly with the fund manager before sending any money — not from a third-party website.
5. Receive your unit confirmation. You will get a statement or notification showing how many units you purchased and the NAV at which they were bought. Keep this.
6. Monitor via app or portal. All established fund managers provide an online portal or mobile app showing your current balance, NAV history, and transaction records.

Tax Treatment of Unit Trust Returns

Two things to know about tax and unit trusts in Kenya.

First, withholding tax of 15% is deducted from interest and dividend income earned within the fund. This is done by the fund manager before returns are credited to your account — you do not file or pay this separately. The figure you see as your return is net of this withholding.

Second, capital gains on the sale of unit trust units are currently exempt from capital gains tax for Kenyan resident individuals, under the Income Tax Act as amended. This position may change with future Finance Acts, so it is worth checking the current law if you are making large redemptions.

If you are in any doubt about your personal tax position, the Kenya Revenue Authority (KRA) website at kra.go.ke publishes guidance, or consult a tax advisor.

Unit Trusts vs Direct Share Investment

A question that comes up often: why not just buy shares yourself on the NSE?

Direct share investing gives you full control — you pick the stocks, you pay no annual management fee on returns, and if you pick well you can significantly outperform a unit trust. It is also more engaging for people who enjoy following companies and the market.

The downside: picking individual stocks requires time, knowledge, and a tolerance for concentrated risk. If you buy three stocks and one collapses, you lose a third of your portfolio. A unit trust holding 20 companies in its equity portfolio dilutes that risk automatically.

The practical recommendation for most beginners: start with a money market fund to build the habit of investing and understand how the mechanics work. Once you have a solid base — at least 6 months of expenses in an MMF as an emergency fund — then consider whether direct shares or an equity fund is the right next step for your long-term money. You do not have to choose one or the other permanently.

One Number to Check Before You Invest

If you have an active loan, run this comparison before moving money into a unit trust: what is your loan interest rate, and what is the unit trust likely to return?

If your personal loan charges 24% per annum and your MMF returns 14%, every shilling you invest instead of paying down that loan is losing you 10 percentage points per year. In that situation, clearing the loan is the better investment. The maths is unambiguous.

If your loan rate is below your investment return — or if you have no loans — then investing makes straightforward sense. The loan calculator linked below will show you exactly what you are paying on your current debt, so you can make this comparison properly before committing money.