FUND CHARACTERISTICS AND FINANCIAL PERFORMANCE OF COLLECTIVE INVESTMENT SCHEMES IN KENYA

Kalekye S. Ndanu - Master of Business Administration (Finance) Kenyatta University, Kenya

James M. Gatauwa (PhD) - Department of Accounting and Finance, Kenyatta University, Kenya

ABSTRACT

A collective investment scheme is a plan where many investors who share the same financial goal pool together funds and appoint a professional manager of these funds to do the investment on their behalf at a fee. This makes investment in collective investment schemes more cost effective in accessing a several shares/ equity, bonds, fixed deposits and treasury bills. Managing performance of collective investment schemes involves use financial ratios such as profitability ratios and leverage ratios. The general objective of this research project was to determine the effect fund characteristics on the financial performance of collective investment schemes in Kenya. The specific goals of the study were; to investigate the impact of that institutional factors, investment strategy, the regulatory framework and lastly to the scheme products on the performance of collective investment schemes in Kenya financially. The study was grounded on theories such as: the Capital Asset Pricing Model (CAPM), the Keynesian Theory, the Arbitrage Pricing Theory (APT) and the Theory of Financial Deepening. The researcher used secondary data in the study and the 21 Nairobi based CISs constituted the target population. Because of the small CIS population, Census was used in the study. The stata method was also used by the researcher in the analysis of data. Diagnostic tests and panel data modeling was carried out simultaneously. The study took ethical considerations into account. Study findings will bridge the knowledge gap and also make an improvement on the academic reference material on performance of Kenyan CIS. This study also expanded the available empirical evidence by using return on investment (ROI) metric as measure of the CIS performance. It concluded that institutional factors have a significant effect on return on investment (ROI), the findings further showed that scheme products had an effect on the CIS performance. The study concentrated on Collective investment schemes in Kenya which operated between 2018 and 2022, a period during which possibly some CISs that either had not existed or were just starting up leading to unbalanced panels being generated. Secondary data that was used could also have resulted into undetected errors. The research suggested that further studies can be done focusing on examining the effect of funds characteristics on other institutions within the capital markets in Kenya. This will help in improving the available knowledge on the elements that promote returns on investments of new players in the country’s finance industry.

Full Length Research (PDF Format)