CMA APPROVES NEW UNIT TRUST SCHEMES AND ADDITIONAL SUB-FUNDS TO EXPAND INVESTOR CHOICE

The Capital Markets Authority (CMA) of Kenya recently approved the registration of two new umbrella unit trust schemes and several additional sub-funds under four existing schemes. This strategic move, exercised under the powers conferred by section 30 of the Capital Markets Act (Cap 485A) and Regulation 15 of the Capital Markets (Collective Investment Schemes) Regulations, 2023, significantly expands investor choice and product diversity within Kenya's capital markets. The approvals introduce a broader range of investment options, including multi-currency and multi-asset strategies, reinforcing the CMA's commitment to market deepening, investor protection, and fostering confidence in the regulated investment landscape. This development is particularly relevant for legal professionals advising on investment vehicles and regulatory compliance in the Kenyan financial sector.

On July 6, 2026, the Capital Markets Authority (CMA) of Kenya announced a significant expansion of the country's collective investment schemes (CIS) landscape, approving two new umbrella unit trust schemes and several additional sub-funds under four existing schemes. This regulatory action, undertaken pursuant to section 30 of the Capital Markets Act (Cap 485A) and Regulation 15 of the Capital Markets (Collective Investment Schemes) Regulations, 2023, marks a pivotal moment for Kenya's financial markets, aiming to enhance investor choice and deepen market sophistication.

The approvals introduce a diverse array of investment products, encompassing various asset classes and currency denominations, from local shilling money market funds to multi-currency and multi-asset special funds. This initiative underscores the CMA's ongoing efforts to foster a robust and globally competitive capital market, promoting innovation while upholding its core mandate of investor protection and market integrity. For legal practitioners, this development necessitates a thorough understanding of the expanded product offerings, the underlying regulatory framework, and the implications for advising clients on investment strategies and compliance within a dynamic market environment.

The regulatory framework governing capital markets in Kenya is primarily enshrined in the Capital Markets Act (Cap 485A) and its subsidiary legislation. The CMA, established under this Act, is the principal regulator responsible for supervising, licensing, and overseeing capital markets within the country. Its mandate includes ensuring the orderly, fair, and efficient functioning of Kenya's capital markets, which encompass securities exchanges, fund managers, stockbrokers, investment banks, and other financial intermediaries.

Collective Investment Schemes (CIS), commonly known as unit trusts, are pooled investment vehicles where funds from multiple investors are combined and managed by professional fund managers. These schemes are regulated under the Capital Markets (Collective Investment Schemes) Regulations, 2023, which provide for their registration, licensing, management, and operational requirements. Section 30 of the Capital Markets Act (Cap 485A) empowers the CMA to approve institutions to promote Collective Investment Schemes, while Regulation 15 of the Collective Investment Schemes Regulations outlines the specific procedures and requirements for the registration of such schemes and their sub-funds. The regulatory framework emphasizes investor protection through mandatory disclosure requirements, professional management, and oversight by independent trustees and custodians.

The recent approvals by the CMA demonstrate a proactive approach to market development, directly leveraging the powers granted under the Capital Markets Act and the Collective Investment Schemes Regulations. Section 30 of the Capital Markets Act (Cap 485A) is central to the CMA's authority in this regard, enabling it to sanction the establishment of new collective investment schemes. Concurrently, Regulation 15 of the Capital Markets (Collective Investment Schemes) Regulations, 2023, provides the detailed procedural guidelines for the application and registration of these schemes and their constituent sub-funds.

Among the newly approved entities are the Cinemark Unit Trust Fund, featuring seven sub-funds across money market, fixed income, and multi-asset strategies in both Kenya Shilling and US Dollar denominations, and the Karsis Unit Trust Scheme, which introduces twelve sub-funds covering money market, fixed income, multi-asset, and private debt strategies in Kenya Shillings, US Dollars, Euros, and Sterling Pounds. Additionally, existing schemes from Absa Asset Management Limited, Dry Associates Investment Bank Limited, Madison Investment Managers Limited, and Tradiam Investment Services Limited have received approval for new sub-funds, further diversifying the market.

This expansion is significant for several reasons. Firstly, it enhances investor choice, allowing both retail and institutional investors access to a wider spectrum of professionally managed investment products tailored to varying risk appetites and financial objectives. The introduction of multi-currency funds, in particular, offers avenues for currency diversification and exposure to international markets, which is crucial in managing foreign exchange risk and tapping into global growth opportunities. Secondly, the approvals contribute to increased market depth and liquidity, fostering a more robust and resilient capital market. The growth of 'special funds,' a category offering multi-currency and multi-asset strategies, to become the fastest-growing segment of Kenya's fund management industry, highlights the market's demand for such sophisticated products.

From a regulatory perspective, the CMA's continuous oversight ensures that these new schemes and sub-funds adhere to stringent compliance standards, including disclosure requirements, investment restrictions, and governance structures. This commitment to transparency and investor protection is vital for maintaining confidence in the capital markets. However, the proliferation of complex products also places a greater onus on investors to conduct due diligence and understand the inherent risks, a point the CMA itself emphasizes by urging investors to review information memoranda and trust deeds.

While the regulatory framework for CIS is robust, the introduction of new and complex instruments, such as private debt strategies within unit trusts, may necessitate ongoing vigilance and potentially further refinements to ensure adequate investor safeguards and market stability. The Capital Markets (Alternative Investment Funds) Regulations, 2023, gazetted concurrently with the CIS Regulations, also indicate a broader trend towards regulating diverse pooled investment vehicles, including those targeting sophisticated investors. This holistic approach to regulation is crucial for managing systemic risks as the market evolves.

The Capital Markets Authority's approval of new unit trust schemes and additional sub-funds represents a significant stride in the development and deepening of Kenya's capital markets. By expanding the range of regulated investment products, the CMA is not only providing greater investor choice and opportunities for diversification but also reinforcing confidence in the integrity and efficiency of the market. This move aligns with the Authority's strategic objectives of fostering innovation and ensuring robust investor protection within a dynamic financial landscape.

For legal practitioners, this development necessitates a heightened awareness of the evolving product landscape and the intricate regulatory requirements governing Collective Investment Schemes. Advising clients on these new offerings will require a thorough understanding of the Capital Markets Act (Cap 485A), the Capital Markets (Collective Investment Schemes) Regulations, 2023, and the specific terms of each scheme's information memorandum and trust deed. Practitioners should also remain vigilant for further regulatory guidance or amendments that may arise as these new products gain traction and the market continues to mature. The emphasis on investor education and due diligence remains paramount, ensuring that clients make informed decisions aligned with their financial goals and risk profiles.