Effects of Unit Trust Products Mix on Turnover of Asset Management Companies in Kenya

Abstract

Purpose: The focus of this study was to establish the effect of unit trust products mix on turnover of Asset Management Companies in Kenya.

Methodology: The study was modeled as a mixed methods research design which incorporated both qualitative and quantitative methods of research. Primary and secondary data was collected and thereafter analyzed through a multiple linear regression model. Data from 10 of the 21 registered mutual funds managers as at April 2017 was used for the study.

Findings: The study revealed that holding proportions of Equity funds, Money market funds, Balanced funds and bond funds constant revenues of asset managers would be at 7.306, a unit increase in equity funds would lead to an increase in revenues of asset managers by a factor of 1.86, a unit increase in money market would lead to an increase in revenue of asset managers by a factor of 0.861, a unit increase in balanced funds would lead to increase in revenue of asset managers by a factor of 0.672, further a unit increase in size of bond fund would lead to an increase in the revenues of asset managers by a factor of 0.369. Therefore, the industry is generally experiencing unbalanced investment volumes and, hence, income level in the unit trust products.

Implications: This study implies that different unit trust products had different degrees of contributions to the total income attributed to unit trusts. Also, unit trust products had a positive impact on the incomes by asset management companies but losses in some unit trust products had negative effects on incomes of the companies as well. This necessitates for the intervention of authorities such as the Capital Markets Authority and make policies that encourage the even distribution of investments in unit trusts and a fairer competitive environment for the mutual fund managers.

Value: This study will aid the fund managers in improving their skills to make viable decisions by taking into consideration different unit trust products and their optimal performance in the Kenyan market. Secondly, the asset management companies should comprehend how best to add value to unit trust products with the intent of boosting and diversifying their incomes. Unit holders should also be able to understand how best to link asset management performance through their reported incomes over specific periods. The investors should also have a better glimpse on the overall health of the asset management industry by observing trends and key performance indicators (KPIs) that denote the overall health of the capital markets in Kenya. This study should be of benefit to the Kenyan government through its bodies; National Security Exchange (NSE) and Capital Markets Authority (CMA). The relevant bodies should be in a better position to avail informed policies and counsel to the relevant asset management companies and authorities hence aid the market efficiency and industrial growth.