Equity Investments and Performance of Unit Trust Funds in Kenya

Abstract

Unit trust funds strive to record good performance in order to realize their investment objectives. However, not all unit trust funds record good performance. The current study therefore sought to determine the effect of investing in equity on the performance of unit trust funds in Kenya. Fund size had been adopted as a moderator and therefore the study further sought to determine the moderating effect of fund size on the relationship between equity investments and performance of unit trust funds in Kenya. This study adopted a positivism research philosophy and a causal design. Target population was 37 approved unit trust funds in Kenya as at August 2024. The study used secondary data which was collected using a secondary data collection sheet. Data collected was analyzed using Stata version 18.0. Both descriptive and inferential statistics was used in data analysis. Descriptive statistics that were adopted in this study include; mean, standard deviation, minimum and maximum while the inferential statistic tools that were used include both Pearson correlation and panel data analysis. Hausman test was used to determine whether to adopt a fixed effects model or a random effects model. Jacque Bera, Breusch-Pagan, Durbin-Watson tests was used to test normality of residuals, heteroscedasticity and serial correlation respectively. Multicollinearity was tested using variance inflation factor. Stationarity tests were conducted in the study. Findings revealed that investing in equity has a significant positive effect on the performance of unit trust funds with (β= 0.270, p < 0.05). Fund size had a significant moderating effect on the relationship between investing in equities and performance of unit trust funds with (β= 0.724, p<0.05). The study concluded that investing in equity enhances the performance of unit trust funds in Kenya. Fund size affects the relationship between investing in equities and performance of unit trust funds. The study recommended that the fund managers of unit trust funds should increase the proportion on investment in equity as it has the potential to increase asset return.