Abstract:
In the Kenyan, unit trusts have played a pivotal role in the growth and development of
the economy. Unit trusts have grown in acceptance and popularity as evidenced by the
growth in the number of approved unit trust funds from virtually zero in 2001 to 11 in
2008. However, performance of unit trusts has elicited a lot of questions, there has
been an average growth of Sh1.9 billion annually to Sh17.6 billion in a span of nine
years much slower than other financial sector investments such as pension funds that
have more than doubled within a span of five years. The purpose of this study thus
was to examine some of the factors affecting financial performance of unit trusts in
Kenya. The specific objectives were to establish the effect of management structure
on financial performance; to establish the effect of ownership structure on financial
performance and to find out the effect of organizational governance on financial
performance the Unit Trusts in Kenya. The study employed correlational research
design involving 30 Portfolio managers and 9 Fund Managers from 11 unit trusts. The
study used structured questionnaires in the collection of primary data whereas
financial performance data was gathered from secondary sources. Data collected was
analyzed using descriptive statistics including frequencies, percentages, mean and
standard deviation. Further Pearson Product Moment Correlation (r) was used to test
the hypothesis. The key study findings were as follows: the constitution of
management structure compliant to the requirements of the capital markets authority
played a significant role in enhancing the financial performance of unit trusts. A
significant proportion of the unit trusts were non-bank owned with participatory
approach as the most popular management style. Diversity of ownership in the hands
of different holders did not have a significant effect on the financial performance of
unit trusts. Governance was fairly practiced in unit trusts and it significantly affected
the financial performance of unit trusts. This study recommends the need for capital
market authority to enhance monitoring of the activities of unit trusts and regular
evaluations to establish their level of compliance with the requirements
