RP-Accounting and Finance Department

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Browsing RP-Accounting and Finance Department by Author "Akama, Thaddeus Onyinkwa"

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    Management Fee and Yield of Money Market Unit Trusts in Kenya
    (Stratford Peer Reviewed Journals and Book Publishing, 2025-10) Akama, Thaddeus Onyinkwa; Jagongo, Ambrose; Ndede, Fredrick W. S.
    Management fee is a critical factor in the performance of money market unit trusts. Investors expect money market unit trust schemes to deliver above-market financial returns, relying on the expertise of professional managers to justify the fees charged. However, many of these schemes struggle to consistently outperform the market, leading to diminished portfolios and missed investment opportunities. This underperformance can be attributed to various factors, including the impact of management fees on net returns. Thus, this study investigated how management fees impact unit trust yields in Kenya. The study employed an explanatory research methodology, utilizing panel data analysis over the period from January 1st, 2013, to December 31st, 2022. Data were collected from secondary sources, including Capital Markets Authority, Central Bank of Kenya, Kenya National Bureau of Statistics, and unit trust performance reports. The findings revealed that management fees significantly influenced the yield of money market unit trusts in Kenya. Higher management fees were associated with lower yields, highlighting the importance of balancing fees and returns. The study found a consistent negative association between management fees and yield across different types of money market unit trusts, with insurance-affiliated funds showing the strongest negative correlation. Regression analysis indicated that a one-unit increase in management fees was associated with a 0.62176 decrease in yield, with management fees explaining 2.90% of the yield variations. Furthermore, inflation directly impacted fund yields and moderated the effect of management fees on yield performance. Based on these findings, the study recommends that fund managers critically examine and optimize their fee structures, balancing operational costs with competitive returns. Regulators should implement policies to promote fee transparency, consider setting guidelines or caps on management fees, and encourage performance-based fee structures. Investors should carefully evaluate fee levels when selecting funds, considering the trade-off between fees and potential yields. The study concludes that efficiency in fund management, rather than higher fee structures, may be key to generating superior yields in Kenyan money market unit trusts.