Effect of gross domestic product on financial performance of collective investment schemes in Kenya
Abstract
Collective investment schemes are pools of investments which bank their relevance on
management ability to cause investments to be done through them. The main motivation
for investment is to increase wealth and therefore fund managers are gauged on their
ability to add value to the assets under their stewardship. Like any other investment
project, they are affected by conditions within and outside themselves. GDP, which is a
macroeconomic factor is one of the key conditions expected to impact of CIS
performance. Macroeconomic factors are those factors which can potentially affect the
CIS performance but are external to the entities. With their nature, macroeconomic factors
are expected to have a varying effect on financial performance and growth of CIS
depending on their favorability. This study’s objective was therefore to determine the
impact of gross domestic product on the financial performance of collective investment
schemes in Kenya. The research was based on the financial intermediation theory, agency
cost theory, modern portfolio theory and the financial inclusion and development theories.
The study adopted a casual research design and the population comprised of the nineteen
licensed CIS in Kenya. The study used quarterly secondary data which was obtained from
the Capital Market Authority, Central Bank of Kenya and the Kenya National Bureau of
Statistics for a period of 10 years between 2010 and 2019. The collected data was first
summarized in an excel sheet and descriptive statistics used to summarize it. A regression
technique was then applied using STATA software version 14.2 and results interpreted in
line with the research objectives. The analysis was done at four levels based on specific
unit trusts which entail Money Market Funds, Balanced Funds, and Equity Funds and
Fixed income Funds. The results revealed GDP had a positive and significant relationship
with money market funds returns while stock returns had a positive and insignificant
relationship with the money market fund returns whereas interest rates had a positive and
significant relationship with money market fund returns. The study also found that GDP
and interest rates had a positive and relationship with the balanced funds returns
respectively while stock returns had a positive and significant relationship with the
balanced funds. Further, the study found that GDP and interest rates had a positive and
insignificant relationship with the equity funds returns respectively while stock returns
had a positive and significant relationship with the equity funds returns. Finally, the study
documented GDP, stock returns and interest rates had a negative and insignificant
relationships with fixed income funds yields respectively. The study concluded that GDP
and interest rates significantly influences the performance of money market funds while
stock market performance significantly influences the performance of balanced and
equity funds respectively.
Publisher
UoN
Subject
Effect of gross domestic product on financial performance of collective investment schemes in KenyaRights
Attribution-NonCommercial-NoDerivs 3.0 United StatesUsage Rights
http://creativecommons.org/licenses/by-nc-nd/3.0/us/Collections
- School of Business [1411]
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