NSE Shares vs Special Funds? Comparing Returns on a Ksh1M Investment in 2026 H1

As Kenyan investors continue searching for investments that can deliver higher returns than traditional savings products, two options have increasingly stood out: buying shares on the Nairobi Securities Exchange (NSE) and investing in Special Funds.

Both are considered medium- to high-risk investments with the potential to generate attractive returns, but they work differently and are suited to different types of investors.

In this article, we compare what a Ksh1 million investment made at the beginning of 2026 would be worth now based on their performance during the first half of the year.

Case 1: Special Funds

Special Funds are a type of collective investment scheme where investors pool their money and professional fund managers invest it across multiple asset classes.

Unlike Money Market Funds, Special Funds have the flexibility to invest in local and foreign equities, government securities, commodities such as gold, derivatives, non-listed companies and other alternative investments.

Based on the performance of Mansa X Special Fund, Etica Special Multi Asset Fund, Oak Special Fund and Kuza Momentum Special Fund, the average net return during the first six months of 2026 was 8.93%.

If those returns were sustained and compounded over a full year, they would translate to an annualised return of approximately 17.86%.

For an investor who spread Ksh1 million equally across the four funds at the beginning of January, the investment would have generated approximately Ksh89,300 in returns by the end of June while the principal investment remained intact.

Case 2: NSE Shares

To compare the stock market, we use the NSE All Share Index (NASI), which tracks the performance of all companies listed on the Nairobi Securities Exchange.

The index opened the year at 187.35 points on January 2 and closed at 224.15 points on June 30, representing a gain of 19.64% over the six-month period.

If an investor had placed Ksh1 million in a portfolio that tracked the broader market, the value of that investment would have increased by approximately Ksh196,400, growing the portfolio to about Ksh1.196 million, excluding any dividend income received from individual stocks.

Comparison of Special Funds and NSE Shares

Diversification

One of the biggest advantages of Special Funds is diversification. Rather than relying solely on the performance of listed companies, fund managers allocate investors' money across different asset classes, including equities, fixed-income securities, commodities, derivatives and, in some cases, offshore investments.

This diversification can reduce the impact of poor performance in any single asset class.

Investing directly in shares, on the other hand, leaves an investor exposed to movements in the stock market unless they deliberately diversify across many companies and sectors.

Income Potential

Another key difference is how returns are generated. Investors in listed companies can benefit from capital gains when share prices rise and may also receive dividends if the companies distribute part of their profits.

Special Funds do not pay dividends. Instead, investors benefit through the growth in the fund's net asset value as the underlying investments generate returns.

Investment Horizon and Liquidity

Shares listed on the NSE are generally highly liquid, allowing investors to buy or sell on any trading day. However, they are often better suited for long-term investors, as prices can fluctuate significantly in the short term.

An investor may be forced to sell during a market downturn if they need cash urgently, potentially locking in losses.

Special Funds, by contrast, typically come with a lock-in period, often around six months, meaning investors cannot immediately withdraw their money. While this reduces liquidity, it also encourages investors to stay invested long enough for the fund manager's strategy to play out.

Which Option Is Better?

Investors seeking the highest possible returns and who are comfortable with market volatility may prefer buying shares directly, particularly if they have the knowledge and time to monitor their investments.

Those looking for professional management and diversification across multiple asset classes may find Special Funds more suitable, even if returns are lower than those delivered by the stock market during an exceptionally strong year.

Ultimately, both investments carry medium- to high-risk profiles and neither guarantees positive returns. Investors should therefore assess their financial goals, investment horizon and ability to tolerate market fluctuations before deciding where to invest.