Asset Allocation and Profitability of Fund Managers Registered by Retirement Benefits Authority Kenya
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Date
2026-01
Journal Title
Journal ISSN
Volume Title
Publisher
international Academic Journal of Economics and Finance (IAJEF)
Abstract
Over the past decade, fund managers
registered with Kenya’s Retirement
Benefits Authority (RBA) have
experienced declining and highly volatile
profitability and returns on investment,
raising concerns among financial
practitioners and scholars. Persistent
reductions in returns undermine investor
confidence, erode value creation, and
heighten systemic investment risk,
underscoring the need to enhance
profitability to ensure sustainable growth
and stable investor returns. Despite
professional expertise, Kenyan fund
managers have struggled to optimize
performance amid fluctuating market
conditions. Since asset allocation decisions
are widely recognized as critical
determinants of profitability, this study
examined the effect of asset allocation on
the profitability of RBA-registered fund
managers in Kenya. Specifically, the study
assessed the influence of allocations to
fixed income securities, equities, and real
estate investments on profitability, while
also evaluating the moderating role of
market fluctuations. The analysis was
grounded in established financial theories,
including the Capital Asset Pricing Model
(CAPM), the Fama–French Three-Factor
Model, and the Arbitrage Pricing Theory
(APT). A census of all 35 RBA-registered
fund managers was undertaken, using
secondary data drawn from audited
financial statements covering the period
2015–2024. Panel regression analysis,
Pearson correlation coefficients, and
descriptive statistics were employed.
Results revealed weak but positive
correlations between asset allocation and
profitability, with fixed income assets
showing the strongest association. FGLS
regression findings indicated that real estate
investments had a strong and statistically
significant positive effect on profitability,
while fixed income securities exhibited a
marginally significant positive influence. In
contrast, equity investments had a
significant negative effect on profitability.
Furthermore, market volatility was found to
positively moderate the relationship
between asset allocation and profitability.
The study concludes that increasing
allocations to fixed income and real estate
enhances profitability, whereas excessive
exposure to equities diminishes financial
performance.
Description
Research Article
Keywords
Citation
Odhiambo, L. A., Kosgei, M., Gitagia, F. K. (2026). Asset allocation and profitability of fund managers registered by Retirement Benefits Authority Kenya. International Academic Journal of Economics and Finance (IAJEF) | ISSN 2518-2366, 5(2), 216-240.