A survey of the applicability of Markowitz portfolio optimization model in overall asset allocation decisions by pension fund managers in Kenya
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Date
2006-09Author
Mwangangi, Benjamin M
Type
ThesisLanguage
enMetadata
Show full item recordAbstract
This study sought to explain whether pension fund managers in Kenya apply Markowitz
portfolio optimization model in asset allocation. The study found out that over 60% of the
managers applied the model. However the applicability was implicit due to various
investments constrains key of which was stated as client constraints and the lack of a well
developed and reliable database to provide the required inputs into the model. Other
constraint cited were macro-economic forces such as inflation, interest rates and general
market trends. The study further established that over the period 2004 - 2005 fund
managers maintained consistent allocation of funds across the various asset categories
implying that there was no change of asset allocation model I strategy.
The study further sought to identify the various factors that influence the adoptability of
this model in Kenya. The key factor cited by the managers applying the model was that
the model ensured a balance between risk and return and that it had proved successful
overtime. Other factors cited were the fact that the model ensured a match between the
funds assets and liabilities, that the model could be applied across the various assets and
that the model was compatible with scheme investment policy. Contrary to arguments
that the main limitation of the model was that it is a single period model and complex to
apply none of the managers cited these factors as being limiting I inhibiting it
applicability.
Publisher
University of Nairobi
Rights
Attribution-NonCommercial-NoDerivs 3.0 United StatesUsage Rights
http://creativecommons.org/licenses/by-nc-nd/3.0/us/Collections
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