An equity fund is a pooled investment that puts your money mainly into shares listed on the stock market, managed for you by professionals. Instead of buying individual stocks yourself, you buy units in the equity fund, and the fund owns a basket of shares on your behalf. The aim is long-term growth as those shares rise in value, which means an equity fund can reward you well over years but can also fall in a bad one. This guide explains exactly how an equity fund works in Kenya, the returns, risks, fees and how to invest.
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Key takeaways
- An equity fund pools investors’ money and invests it mainly in listed shares for long-term growth.
- You buy units; the unit price rises and falls with the shares the fund holds.
- It offers higher potential returns than a money market fund, but real risk: the value can drop.
- Equity funds charge higher fees, so compare the annual cost before choosing.
- They suit long-term investors (five years or more), not money you may need soon. Educational only, not advice.
What is an equity fund, exactly?
An equity fund is a type of collective investment scheme, sometimes called a unit trust, that invests the pooled money of many investors into shares. In Kenya, that usually means shares listed on the Nairobi Securities Exchange, and some funds also invest across Africa or globally. A professional fund manager decides which shares to buy and sell. Your stake is measured in units, and each unit has a price that reflects the value of all the shares in the fund. When those shares rise, your units are worth more; when they fall, your units are worth less.
How an equity fund works
You invest a lump sum or regular amounts and receive units at the current price. The fund manager spreads that money across many shares, which gives you instant diversification, something hard to achieve buying stocks one by one. Any dividends the shares pay are either reinvested to buy more units or paid out, depending on the fund. Because an equity fund is built for growth, most of your return comes from the share prices rising over time rather than from income. You can usually sell your units back to the fund when you want, though it is designed for the long haul.
Returns and risk
This is the heart of it. An equity fund can deliver strong long-term growth, but it swings. In 2025, Kenyan equity funds reported returns ranging from roughly 10% to over 22%, a good year, yet the wider market rose even faster, so many funds still trailed the index. In a weak year, an equity fund can fall in value. That volatility is the price of the higher potential return, and it is why time matters: the longer you stay invested, the more room the fund has to ride out the bad patches and compound the good ones.
Fees and tax
An equity fund costs more to run than a money market fund because it is actively managed, so expect a higher annual management fee, often well above 1%. That fee comes out of your returns, so it matters. On tax, dividends earned inside the fund are subject to the usual 5% withholding, while gains on Kenyan listed shares are currently exempt from capital gains tax, which helps the growth side. Always check the exact fee on the fund’s fact sheet before you invest.
How to invest in an equity fund in Kenya
You do not need a CDS account or a stockbroker to buy an equity fund, unlike buying shares directly. You invest straight through a licensed fund manager or unit trust, complete a simple onboarding, and deposit your money. Minimums are often modest, sometimes a few thousand shillings, though they vary. Compare the main options in our guide to the best equity funds in Kenya, and for a fund we have reviewed in detail see the Arvocap Thamani Equity Fund. All funds are regulated by the Capital Markets Authority.
Is an equity fund right for you?
An equity fund suits you if you have a long time horizon and can accept the ups and downs in exchange for higher potential growth. If you might need the money within a year or two, or a sharp drop would push you to sell in a panic, it is the wrong home for that cash. A common approach is to build a safe, liquid base in a money market fund first, then add an equity fund for growth. See the trade-off clearly in our equity fund vs money market fund comparison, use our compound interest calculator to see how long-term growth compounds, and read how to build an investment portfolio.
Frequently asked questions
Is an equity fund safe?
An equity fund is riskier than a money market fund because it holds shares that can rise and fall. Your capital is not stable, and the value can drop in a bad year. It suits investors seeking long-term growth who can accept swings, not those who need safe, accessible cash.
How much do I need to start an equity fund?
Minimums vary by provider but are often modest, sometimes just a few thousand shillings to open and smaller amounts to top up. Check the specific fund’s requirements on its fact sheet, and remember an equity fund is meant to be held for years, not months.
Equity fund or money market fund, which should I choose?
It depends on your goal. Choose a money market fund for safety, stability and short-term cash; choose an equity fund for long-term growth you can wait for. Many investors hold both, a money market fund as the safe core and an equity fund for the growth slice.
Ready to look at specific funds? See our reviews of the NCBA Equity Fund, Britam Equity Fund and Old Mutual Equity Fund, each with its latest return and an honest verdict.
Disclaimer: The content on Sarafu is for educational and informational purposes only and does not constitute financial or investment advice. Any figures mentioned are approximate, are past performance, and were sourced at the time of writing. All investments carry risk; the value of an equity fund can go down as well as up, and you may get back less than you invest. Always verify current figures on the fund’s fact sheet and consider consulting a licensed financial advisor before investing.
