The effect of investment strategies on the financial performance of collective investment schemes in Kenya

Abstract

The purpose of this study was to assess the effect of investment strategies on the financial performance of collective investment schemes in Kenya. The research questions therefore were; what are the preferred investment strategies by collective investment schemes and what is the effect of investment strategies on the financial performance of collective investment schemes in Kenya? The research design was descriptive survey study in nature since it focused on all collective investment schemes in Kenya. The population of the study was all the collective investment schemes in Kenya. This implied that the total population of this study is 16 investment schemes firms. The study used both primary and secondary data from the financial statements of the investments firms. The selected period was 5 years. The researcher used frequencies, averages and percentages in this study. The researcher used Statistical Package for Social Sciences (SPSS) to generate the descriptive statistics and also to generate inferential results. Regression analysis was used to demonstrate the relationship between the investment strategies and the profitability of the collective investment schemes. The findings reveal that collective investment schemes in Kenya had adopted two types of strategy which are passive and active. However the study findings revealed that these strategies were further categorized into five categories which include aggressive, value, moderate risk, conservative and high risk aversion strategies. The findings also revealed that there was a positive and significant relationship between investment strategy and profitability and return on assets. The study recommended that the collective investment schemes to pursue passive strategy because it yields superior profitability than active strategy, that the firms should pursue passive strategy as it yields superior returns on assets compared to active strategy, It was also recommended that the governance structures need to be put in place so as to enhance returns of the stock exchange and that the investment firms to adopt different forms of investments such as investment property, real estate investments, mutual funds, government securities and equity.