An Assessment of the determinants of portfolio performance of Investment groups in Kenya

Abstract

The purpose of this study is to assess the determinants of portfolio performance of investment groups in Nairobi County of Kenya. The five specific objectives were addressed. The first specific objective was to assess the influence of asset allocation on portfolio performance of investment groups in Nairobi County of Kenya. The second specific objective was to assess the influence of market timing on portfolio performance of investment groups in Nairobi County of Kenya. The third specific objective was to assess the influence of security selection on portfolio performance of investment groups in Nairobi County of Kenya. The fourth specific objective was to assess the influence of gender composition of the management team on portfolio performance of investment groups in Nairobi County of Kenya. The fifth specific objective was to assess the influence of size of membership on portfolio performance of investment groups in Nairobi County of Kenya. This study employed a descriptive research design. The target population was 148 investment groups in Nairobi County of Kenya registered with KAIG. A sample of 96 investment groups was drawn from the population using systematic sampling. Data was collected using a questionnaire. Descriptive statistics, correlation analysis and multiple regression analysis were used to analyse the data. To be more precise, asset allocation, market timing and security selection, gender composition of the management team and size of membership were the independent variables and portfolio performance was the dependent variable. The study found that asset allocation policy, security selection and size of membership were the only significant determinants when explaining the performance of investment groups. In addition, market timing and gender composition of the management team were found to be insignificant. The finding of this study suggest that investment groups ought to invest in index funds mainly comprised of treasury bills unless the management team has the necessary skill to realize high risk adjusted return from investments. Investment groups ought to start with a small size of membership and increase group size steadily to maintain group coordination and motivation of current members.