Capital Allocation in Unit Trust and the Growth of Capital Market in Kenya

Robert Kipkorir Cheruiyot ,Florence Memba ,Tabitha Nasieku

doi:10.7176/rjfa/10-12-01

Abstract

Unit trust schemes approach capital allocation in different ways depending on where they are in the growth life cycle and their strategic focus on customer growth. An effective capital allocation strategy consistently creates value to investors’ funds and sustainable growth in the capital market. Therefore this makes capital allocation an important issue to investigate particularly in unit trusts in relation to the continuous shifting of business objectives within the capital market. This study is a useful point of reference for investors, fund managers and government agencies. This study therefore sought to establish the position of capital allocation in unit trust on the growth of capital market in Kenya. The study used explanatory non-experimental research design with the analysis being carried out using a panel data. The entire population involving all the twenty three (23) trust schemes to include all money market, equity and balanced funds managed by the schemes for the period between 2009 to year 2017. The research utilized secondary data because of the small number of unit trusts companies in the NSE and availability of the required data. Secondary data collection sheet was designed and used to collect and record all information necessary on unit trust funds from schemes annual reports, surveys and CMA publications for the period under review. Data were also analyzed using both descriptive statistic and panel multiple regression analysis by means of SPSS Version 21. Both dependent and independent variables were analyzed using panel data to determine the strength and relationships of the variables. The study revealed that Capital allocation contributed positively to the growth of capital market in Kenya. These findings were presented in the forms of a regression model. The study findings is used as a basis to recommend that the unit trust fund managers should actively evaluate the choices when allocating funds since it positively contribute to the growth of capital market. This would contribute to the realization of economic pillars in Kenya vision 2030. Keywords : capital allocation, capital market, growth and unit trusts DOI : 10.7176/RJFA/10-12-01 Publication date :June 30 th 2019

Highlights

It is generally established that asset allocation account for a huge component of the variability in the return on a distinctive investor's portfolio
In view of the findings, the study concludes that capital allocation of funds in collective investment schemes requires sufficient attention by fund managers to draw investment through various innovative options available in the capital market
5.2: Recommendations The study recommends that unit trust funds should embrace prudent and popular capital allocation techniques that provide value to investors’ funds

Summary

Introduction

It is generally established that asset allocation account for a huge component of the variability in the return on a distinctive investor's portfolio. This is true when the overall portfolio is invested in multiple funds and each including a number of known securities (Sharpe, 1992). The analysis of Sharpe (1992) indicates that though it is possible to try to find out a fund's exposure from a careful analysis of the securities held by the fund, other approaches provides further information for the purpose of asset allocation. To examine these behaviors a series of style analyses can be performed, with a fixed number of months for each analysis during the period under consideration

Objectives

Methods

Findings

Conclusion