For decades, the blueprint for passing down wealth in Kenya was largely predictable. Parents bought land, built rental apartments, accumulated shares in blue-chip companies or tucked away money in insurance policies and fixed-income investments, confident that these assets would provide financial security for future generations.
However, that is changing as affluent Kenyans increasingly move part of their wealth into professionally managed investment portfolios with exposure to international markets and alternative assets.
The latest Frank Knight Wealth Report shows that rich investors continued reducing their allocation to real estate in 2026 as they sought investments that offered stronger long-term growth prospects, greater liquidity and broader diversification.
“Investors are increasingly prioritising assets that generate stable income streams, preserve capital and offer easier market exit opportunities,” the report notes.
Among the biggest beneficiaries of this shift are Special Funds – higher-risk collective investment schemes regulated by the Capital Markets Authority (CMA). These funds held Sh203.5 billion in assets as of March 2026, according to the regulator.
Unlike traditional collective investment schemes, Special Funds have greater flexibility to invest across a wider range of assets, including international equities, commodities, foreign currencies and derivatives.
Wealth managers say that increasingly, affluent parents are opening these investment portfolios not only for themselves but also as long-term wealth-building vehicles for their children.
“They are highly sophisticated investors,” Lawrence Lagat, a Wealth Manager specialised in Islamic banking, told BD Life.
“Their aim is not simply to preserve wealth but to multiply it over time before transferring it to the next generation.”
For children below 18, the investments are held in their parents’ accounts until they reach adulthood, after which ownership can be transferred.
Whereas previous generations typically relied on education insurance policies, life insurance or property to secure their children’s financial future, contemporary investors are embracing professionally managed portfolios that provide exposure to global investment opportunities without requiring them to actively monitor international markets.
“The research is delegated to people like us,” said Lagat.
“Most high-net-worth clients understand the value of global markets, but do not have the time to manage these investments themselves.”
The appeal lies in the potential for higher long-term returns, although advisers stress that these investments carry significantly greater risk than conventional products such as treasury bills, fixed deposits and money market funds.
“There is a real element of investment risk and clients need to understand that,” Lagat says.
One of the attractions for wealthy families is compounding, where investment gains are automatically reinvested, allowing returns to generate further returns over time.
Using the Rule of 72, investors estimate how quickly an investment could double by dividing 72 by the expected annual rate of return.
Depending on market performance, some Special Funds have the potential to double investors’ capital within four to five years.
Financial adviser Angelina Oganga of Standard Investment Bank says wealthy investors are increasingly attracted by strategies that seek returns regardless of market direction.
“Our Mansa X Fund targets clients looking to build generational wealth,” she says.
“Through long-short investment plans, we seek opportunities whether markets are rising or falling.”
Liquidity is also driving demand. Unlike property, which can take months to sell, or some savings products that restrict withdrawals, investors in Special Funds can typically access part of their money within two days, while full redemptions usually take around three days.
To manage risk, fund managers diversify investments across multiple asset classes, sectors and geographical markets. Portfolios typically combine relatively stable fixed-income securities with global equities, commodities and foreign currencies, while managers rebalance holdings as market conditions change.
“We manage the portfolios. Depending on market sentiment, we continuously rebalance investments to maximise opportunities while managing risk,” Lagat says.
Despite their reputation for aggressive investing, Special Funds are subject to strict regulatory safeguards.
Client assets are held separately from the fund manager’s money through independent custodians licensed by the Capital Markets Authority (CMA).
“Every licensed fund must also appoint an independent trustee responsible for overseeing how client funds are administered and ensuring major transactions comply with regulatory requirements. If an investor has concerns, they can write directly to the custodian to verify the true position of the fund,” Lagat said.
The CMA also conducts quarterly inspections of licensed Special Funds to monitor compliance, while external auditors review their financial statements annually before they are submitted to the regulator.
Even with these safeguards, wealth managers insist that Special Funds are not suitable for everyone.
“Global markets can be volatile. Commodity prices fluctuate, currencies move sharply and even some of the world’s largest corporations can suffer dramatic losses. We recall the collapse of Lehman Brothers during the 2008 global financial crisis as a reminder that no investment is immune from shocks. We disclose these risks during the onboarding of clients. They must understand that while we invest their money in strong companies and diversify widely, no investment is risk-free,” he says.
However, that balance between risk and reward is what is increasingly becoming acceptable to wealthy Kenyans.
“Rather than asking how to preserve wealth, many are now asking how to multiply it before handing it over to their children, ” Lagat observed.
Ms Oganga concurs. She, however, points out that the risk-mitigating factors put in place are what give the wealthy Kenyans a hedge to want to invest in such high-risk ventures.
“With Special Funds, we are exposed to riskier markets, but with good risk mitigation strategies, the frameworks lower the risks by bringing them down,” she says.
Those strategies could be diversification of investment, where you can have a client invest in as many as 200 assets. At any given time, we are investing our clients’ Special Funds in about 200 financial instruments, in different sectors in different geographies. What that kind of diversification does is reduce the concentration risk of investing in one financial instrument.”
She cites the Covid-19 pandemic as a case study.
“Many industries came to a standstill during the pandemic, but other industries emerged from that, including pharmaceuticals, telecommunication, technology and precious metals,” she said.
“Those industries were doing well at that time, and with diversification, we were still able to deliver a return of 18 percent to our Special Fund investors. These are some of the scenarios that make Special Funds attractive to the wealthy individuals.’’
There is also active management of these portfolios, such as taking up new investment opportunities as soon as they emerge and terminating those that are struggling.
According to Ms Oganga, such mitigating factors have seen the bank consistently offer a return of 18.15 percent to its investors since launching its Special Fund in 2019.
“That 18.15 percent has been net of fees. Our lowest returns recorded during that period have been 15.45 percent,” she said.
“Last year, we recorded our highest return at 20.74 percent. Such numbers are validating, considering the market volatility in 2025.”