Portfolio Composition and Financial Performance of Mutual Funds in Kenya
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Date
2025-06
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Kenyatta University
Abstract
Mutual funds provide investors with access to diverse investment opportunities in regional and international markets. In Kenya, the first mutual fund was approved in December 2001 and since then to date; the number of registered mutual funds in the country has grown to 35. Despite the steady growth in assets under management in the mutual funds from Ksh.56.6 billion in 2018 to about Ksh.175.97 billion in June 2023, there has been downturn in performance of several of these funds which may be a discouragement to investors. Several of them have been reporting losses. For instance, in 2022, CIC Unit Trust Scheme and NCBA Unit Trust reported losses of 22.1 million and 8.7 million shillings respectively from their equity investment funds. This research therefore sought to analyze how equity investment, bonds investment and money market investment affect Kenya’s mutual funds’ financial performance. The study’s theoretical foundation was constituted by three theories: the resource based theory, modern portfolio theory and agency theory. The study used explanatory research design. Purposive sampling technique was used whereby the study only covered 27 mutual funds recognized by the Capital Market Authority as at June 2023. Secondary data was used which was obtained from sources such as CMA, NSE, and mutual funds official website published financial reports. The data was analyzed using SPSS where the process entailed descriptive statistic analysis, correlation and regression analysis. The findings revealed that over the period 2019-2022, the mutual funds decreased equity investment while they increased bonds investment and money markets investment in their portfolios. The study also found that that equity investment, bonds investment and money market investment were each positively correlated with financial performance of the mutual funds. The study concluded that equity investment, bonds investment and money market investment significantly influence performance of the mutual funds. The research recommends a careful analysis of equity investment options by fund managers before investing to ensure they identify equity investment alternative(s) that offer better returns. Besides, they should consider introducing more robust diversification policies among other measures.
Description
A Research Project Submitted to the School of Business and Economics & Tourisim in Partial Fullfilment of the Requirements for the Award of the Degree in Master of Business Administration (Finance Option) Kenyatta University, June, 2025
Supervisors;
1.Charity Njoka