The Effects of Ownership Structure on Financial Performance of Unit Trusts in Kenya

Abstract

Unit trust fund is a form of investment where many investors with similar investment objectives pool money together to be managed by a group of professional managers who invest the pooled money in a portfolio of securities such as shares, bonds and money market instruments or other authorized securities. The concept has been adopted in the Kenyan markets and by 2009, there were 11 operational unit trust funds. However, performance of unit trusts in Kenya in the recent past has witnessed relatively poor results characterized by financial results falling below desired targets. Besides that, the unit trusts have been characterized by highly concentrated ownership, low ownership share of foreign owners, high ownership and decision making power in the hands of the state owned and relatively low ownership shares in the hands of insiders. This trend has continued despite the regulations  enacted  by Capital Markets Authority to provide a framework for the regulation of collective investment schemes to protect shareholder investment and  maximize returns. This study aimed was designed to establish how ownership structure affects financial performance of the Unit Trusts  in Kenya.  The study investigated 11 unit trust funds in Kenya. The target population comprised of all the 11 fund managers in the registered Unit Trusts in Kenya. Secondary data on performance of the unit trusts and primary data from  managers of unit trusts were utilized. Data was analyzed using descriptive statistics  which included: mean, mode standard deviation frequencies and percentages.  Further relationships were obtained between independent and dependent variables using Pearson Product Moment Correlation (R). The findings revealed that diversity in ownership structure of unit trusts to positively affected financial performance among unit trusts. The study, therefore recommended for improvement in management style, increase investment portfolios and diversify asset investment among the unit trusts strategy to realize meaningful stability in financial performance.