DISCOURSE ON FUND SIZE PARADIGMS AND PERFORMANCE OF UNIT TRUST FUNDS IN KENYA

Abstract

When investors take part in any investment, the main objective is to increase their wealth. This is achieved when share prices increase. The performance of unit trusts in Kenya has however been poor compared to their counterparts in the rest of the world. The poor performance is a discouragement to individual and corporate investors in addition to affecting the realization of financial stability according to the Kenya vision 2030. Empirical literature from developed and emerging markets posits that fund size explains the performance of unit trust funds. This study, therefore, investigated the effects of fund size on the performance of unit trust funds in Kenya. The study adopted an explanatory research design and positivism philosophy. The target population was 16 unit trust firms in Kenya as of the end of the year 2017. The study used a census approach. Secondary data was collected from the audited financial statement of respective unit trusts for the period 2005 to 2017 using a data collection schedule. The study established that fund size has a significant positive effect on performance in all funds. The study concluded that an increase in fund size increases performance. The study recommends that capital market authority should monitor the performance of unit trusts constantly and in addition develop merger policies to encourage small unit trusts to merge to take advantage of economies of scale.