An investigation of the determinants of mutual funds Financial Performance
Mutual funds provide an opportunity for investing to the many individuals who lack financial knowledge. This eliminates the amount of time and resources required to identify a ‘best buy’ share or security. To invest in a Mutual fund, investors buy units through the fund manager at the prevailing selling price which is calculated daily. These units can be bought any time as long as the fund has not reached its maximum approved size. Mutual funds face competition from various alternatives, when fund performance is generally not impressive. Studies done on mutual fund performance have reported that most funds did not match performance of comparable market indexes. This study sought to find out how Mutual Fund performance is affected by various determinants. This helped investors to make informed decisions on their investment on Mutual Funds. The descriptive research assets to enhance a systematic description that is as reliable, valid and accurate as possible regarding the responses on the investment options available to unit trust schemes and the aspects that are considered in selecting portfolio combination. The study was also cover banking institutions with mutual funds. The study covered the period 1st January 2008 to 30th December 2012 this study sought to evaluate annual report data. The study solely used secondary data sources available at the companies’ books of account and the NSE or Capital Market Authority offices. The study used multiple linear regression equation and the method of estimation will be Ordinary Least Squares (OLS) so as to establish the relationship between determinants and performance. The study revealed that the determinats of the performance of mutual funds financial performance in Kenya were risk , transaction cost , size and country characteristic. The study found that risk in the management of mutual funds cannot be ignored in any investment venture. The risk of a security is the variability in its expected future returns. High risk securities have high dispersion around the mean while low risk securities will have a low dispersion around the mean. Risk as measured as the variability of returns has received widespread acknowledgement in decision theory. Thus, risk viewed as the variability of returns is quantified in terms of variability measures which include range, mean absolute deviation, variance, standard deviation, and coefficients of variation.