New sovereign wealth fund law prohibits high-risk investments

President William Ruto during the signing of the the Sovereign Wealth Fund Bill, 2026 into law. /HANDOUT

State officials managing Kenya's newly established Sovereign Wealth Fund will face criminal sanctions if they channel public wealth into prohibited investments.

The Sovereign Wealth Fund Act, 2026 assented to by President William Ruto yesterday, bars the fund from investing in speculative derivatives, private equity, commodities, art, unlisted assets, real estate located in Kenya and securities issued by Kenyan entities.

This is after the country moved to impose strict controls on how the fund's assets can be invested.

The law that was sponsored by Leader of Majority Kimani Ichung’wah, says that the restrictions are intended to shield the country's wealth from excessive risk while ensuring the fund delivers sustainable long-term returns for future generations.

“The Bill (Now Act) imposes heavy penalties for those who misappropriate any funds or assets from the Fund, or assist any person to misappropriate funds,” reads the Act.

The law also introduces stiff penalties for officials or other persons found to have misappropriated the fund's assets or knowingly facilitated their misuse.

The Sovereign Wealth Fund is designed to invest revenues generated from Kenya's mineral and petroleum resources while supporting strategic infrastructure development, protecting the economy from unexpected shocks and building long-term national savings.

By prohibiting investment in several high-risk or potentially conflicted asset classes, lawmakers aim to insulate the fund from politically driven investment decisions and speculative ventures that could erode its value.

Instead, the Act requires the fund to follow prudent investment principles supported by risk management frameworks and professional fund managers tasked with preserving and growing national wealth.

The law also establishes multiple oversight mechanisms to strengthen transparency.

Any withdrawal from the fund must receive approval from the Controller of Budget in line with the Constitution.

The Sovereign Wealth Fund Board is required to prepare annual financial statements for each component of the fund and submit them to the Auditor-General for audit.

The board must also publish annual reports detailing the performance and management of the fund before tabling them in the National Assembly, which retains powers to approve the fund's investment policies.

The Sovereign Wealth Fund comprises three windows: a Stabilisation Fund to cushion the economy during extraordinary shocks, a Strategic Infrastructure Investment Fund to finance priority national projects and mobilise private capital, and a Future Generations Fund.

The Future Generations Fund enjoys additional protection under the Act, with 30 per cent of all mineral and petroleum revenues ring-fenced for long-term savings to ensure Kenya's natural resource wealth continues benefiting future generations after the resources are exhausted.

The new investment restrictions place Kenya among countries that have adopted conservative governance rules for sovereign wealth funds, reflecting growing recognition that strong oversight is critical to protecting public assets and maintaining investor confidence.