A survey of factors influencing investment companies portfolio choice

Abstract

Making portfolio choice is one of the major policy issues in an investment company. An inappropriate portfolio choice may lead to an erosion of investors wealth and subsequent reduction of investors confidence in an investment company. Indeed portfolio choice reflects the investment objective of an investment company. Investing in a portfolio provides an attractive option to the investment companies as it provides maximization of returns and minimization of risks when compared to investing in segregated securities hence need to make an intelligent portfolio choice. The main objective of this study was to identify factors influencing investment companies portfolio choice. To facilitate attainment of the objective this research was designed as a survey study. The population of interest comprised all fund managers registered by capital market authority in Kenya. The respondents were the fund managers and the research used primary data gathered using a questionnaire. The response rate for questionnaires administered was 80%. Data was presented using tables, graphs and charts. Both descriptive and inferential statistics was used to analyze the data. Descriptive statistics such as weighted mean and. proportion was used to bring out the relationship of variables under the study. Correlation analysis was used to test the degree of relationship between consideration of factors influencing portfolio choice and importance of the same amongst investment companies. The findings from this research indicated that investment objective and regulatory framework are the most important factors influencing portfolio choice amongst investment companies. These factors were consistently ranked as very important by all respondents without any deviation of opinion. Factors like risk tolerance, liquidity preference, time horizon, ability to rebalance and availability of personnel were rated differently by different respondents they were important but at varying degrees. This study recommends that investment companies should consider all factors influencing portfolio choice as findings indicate all are important in initiating an investment process. The main challenges and limitations encountered during the research were. Suspicion from some respondents on the confidentiality of information provided and lack of adequate local literature and research materials on subject of portfolio choice.