Bond Investments and Financial Performance of Collective Investment Schemes in Kenya
DOI:
https://doi.org/10.47604/ijfa.3873Keywords:
Bond Investments, Financial Performance, Collective Investment Schemes, KenyaAbstract
Purpose: The growth of collective investment schemesin Kenya has heightened the need to understand how portfolio diversification influences financial performance. Despite significant expansion in assets under management, concerns persist regarding inconsistent profitability and the sustainability of CIS, suggesting potential inefficiencies in portfolio allocation decisions. This study examined the effect of bond investments on financial performance measured by ROA.
Methodology: The study adopted a descriptive research design and employed a census approach targeting all 31 collective investment schemes registered and operating in Kenya. Secondary data covering the period from 2019 to 2025 was collected from CMA reports and audited financial statements of the respective schemes. Data was analyzed using descriptive and inferential statistics. Inferential analysis comprised Pearson’s correlation analysis and panel regression techniques.
Findings: The findings revealed that bond investment positively and significantly influenced financial performance (β = 0.1185, p < 0.05). The model explained 61.84% of the variation in financial performance (R² = 0.6184), indicating that bond investment is a major determinant of the financial performance of collective investment schemes in Kenya.The study concludes that bond investment significantly enhances the financial performance of collective investment schemes and that an optimal mix of equities, treasury bills, bonds, and real estate investments.
Unique Contribution to Theory, Practice and Policy: The study recommends that fund managers diversify bond investments across different maturities and issuers.Further, the CMA should promote investment product innovation and strengthen portfolio disclosure requirements to enhance transparency and investor confidence.The study contributes to the body of knowledge on bond investment and financial performance by providing empirical evidence from the collective investment schemes sector in Kenya. The findings are expected to assist fund managers, policymakers, regulators, and investors in designing effective portfolio management strategies that promote sustainable financial performance and growth within the collective investment schemes industry.
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