Management Fee and Yield of Money Market Unit Trusts in Kenya
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Date
2025-10
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Journal ISSN
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Publisher
Stratford Peer Reviewed Journals and Book Publishing
Abstract
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.
Description
Research Article
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Citation
Onyinkwa, A. T., Jagongo, A., & Ndede, F. W. S. (2025). Management Fee and Yield of Money Market Unit Trusts in Kenya. Journal of Finance and Accounting, 9(5), 26-40. https://doi.org/10.53819/81018102t5390