Business Type: Alternative Investment Funds (AIFs) are specialized investment vehicles that pool capital from sophisticated investors to invest in alternative assets beyond traditional stocks and bonds. AIFs may invest in private equity, venture capital, real estate, infrastructure, hedge fund strategies, commodities, and other non-traditional asset classes. These funds target institutional investors, high-net-worth individuals, and sophisticated investors seeking diversification and potentially higher returns. AIFs are designed for investors who can bear higher risks and have longer investment horizons.
Licensing Requirements: Must be incorporated as a company or established as a trust, provide detailed fund documentation including offering memorandum or prospectus, appoint a licensed fund manager, appoint a corporate trustee and custodian, have a clearly defined investment strategy and risk profile, demonstrate target investor sophistication (typically minimum investment thresholds), meet minimum capital requirements as determined by the Authority, and comply with the Capital Markets (Collective Investment Schemes) Regulations, 2023.
Government Fees: Application fees are approximately KES 150,000 to KES 200,000, with annual renewal fees of around KES 100,000 to KES 120,000.
Timeline: The approval process typically takes 60 to 90 days, subject to the assessment of investment strategies, target investor profile, risk management frameworks, and governance structures.
Limitations: AIFs must target sophisticated investors only, maintain adequate risk disclosures and investor protections, comply with investment restrictions specific to their strategy, implement robust governance and valuation frameworks, provide regular reporting to investors and the CMA, and adhere to restrictions on leverage and illiquid investments as prescribed by regulations.
Penalties: Violations may result in license revocation, suspension of new fundraising, investor compensation claims, fines up to KES 5 million, public censure, and prosecution for fraud or mismanagement.
Enforcement: The CMA conducts regular reviews of fund compliance, monitors investment activities and valuations, ensures proper investor classification and protection, reviews governance structures, and enforces disclosure and reporting requirements.