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

Abstract

Unit trusts have gathered momentum in Kenya since introduction in the year 2001.Picking pace largely due to their abilities to pool funds from many retail investors and ability to diversify across asset classes that have got negative correlation hence capacity to diversify risk and maximize returns. For asset managers, over and above returns to the investors, the revenue generating capacity of their funds to the company as a stakeholder is also key. This income is in terms of asset management fees that in turn translate to overall financial performance of the company. Scanty research has been done locally to help managers choose the perfect asset mix that can enable them construct an efficient portfolio that maximizes returns at a given level of risk as suggested by the modern portfolio theory. This study therefore sought to investigate the relationship between unit trust products mix and turnover of asset management companies and by implication the financial performance of asset management companies. It applied a multiple linear regression model and studying 10 of the 21 registered mutual funds managers as at April 2017. From the regression analysis it was 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. This study proved an asset to policy making process for industry players and critical tool for portfolio construction.