Performance persistency of retirement benefit fund managers in Kenya
Abstract
This study sought to study performance persistence, over time, during a study period of
between 2006 through 2011 in the performance of fund managers’ responsible for
investments of Kenya Retirement Benefit Funds on behalf of the Trustees and the Scheme
members. The fund managers make investments decisions and invest the schemes funds in
an array of investment vehicles ranging from property, government securities, quoted
shares, unquoted shares, corporate bonds, offshore investments, guaranteed funds among
many others and declare income rate at the close of specific period, usually per annum;
this income rate being the proportion of the accumulated incomes over the fund value
under a particular fund manager. The study adopted a descriptive a Research Design. It studied 10 fund managers with a
sample of 265 segregated retirement benefit schemes, data secondary in nature, was
drawn from the RBA systems Analysis involved averaging abnormal returns across the
funds under a fund manager which was both equally weighted by fund size. Asset pricing
models, as the Fama- French three-factor model and the single factor CAPM, were used
in iterative regression models, and the factor loadings were estimated over the whole
study period. Performance of a fund manager was computed by averaging the abnormal
returns of the pension funds managed by a fund manager for each year. Performance
ranked portfolio tests were used to sort fund manager each period into 2 portfolios with
equal numbers of fund managers based on past performance with an annual ranking
period where ranking was on basis of the average return on the funds under management
in the ranking period. Top portfolio consisted fund managers with the highest average
abnormal returns in the ranking period while bottom portfolio with those fund managers
with the lowest average abnormal returns. After which, equally weighted average
portfolio abnormal return of the top and bottom portfolios over a subsequent evaluation
period were calculated which were further averaged over all evaluation periods and a
difference was computed which indicated persistency as it was not centered at zero.
Citation
MBA ThesisSponsorhip
University of NairobiPublisher
School of business