Effects of Asset Allocation on Financial Performance of Unit Trust Schemes in Kenya

摘要

Unit Trust Schemes provide diversification, liquidity, professional managementamong other benefits. In order to diversify the funds raised from various unit holders,fund managers adopt a criterion with which funds are allocated optimally. Adescriptive research design was adopted, and the study period was 5-years. The ratioof the composition of different asset classes to the fund value was used as theindependent variables. Fund age was used as the control variable. Sharpe ratio wasused to measure investment returns and that represented the dependent variable ofthe study. Data was collected from secondary sources and a multiple linearregression model was adopted to assess the association of the variables. Collecteddata showed normality traits, positive autocorrelation when measured using Pearsoncorrelation coefficients. The data also showed mixed results for multicollinearitytests. The weight of money market instruments, corporate bonds, treasury bondsand equity significantly affected performance of Unit Trust Scheme funds. They allhad probability values in the interval of 0 and 0.05. Therefore, the study concludedthat asset allocation significantly affects how a fund will perform. Other factorssuch as timing, manager experience and prevailing economic conditions have to beconsidered when evaluating performance of a fund.