Factors Influencing Retail Investors Investment Decisions In Kenya’s Balanced Funds

Abstract

The collective investment schemes industry has had a steady growth in Kenya growing from an assets under management of 13Bn in Dec 2009 to 61Bn in March 2019. However, 78% of the retail investors have placed their funds in the money market fund despite availability of other funds with potentially higher returns like the balanced fund with a 7% return per share. The purpose of this study was to establish the factors influencing retail investors’ investment decisions in Kenya’s balanced funds. The study was guided by the following objectives; to determine the influence of fund performance, fund manager’s reputation, risk perception and management expenses on retail investors’ investment decisions in Kenya’s balanced funds. To achieve the research objectives of our study, descriptive research design was adopted and primary data was collected using a questionnaire. The target population was 1,210 retail investors who had invested in Balanced Funds with 6 fund managers licensed by CMA in Kenya. Using stratified sampling technique, a sample of 10% translating to 121 retail investors was selected. Data was analyzed using descriptive statistics and multiple regression analysis with the help of statistical package for social sciences (SPSS). Data analysed was presented using tables, pie charts and graphs. The regression results revealed that fund performance, fund manager’s reputation and risk perception have a significant positive effect on the investment decisions among the retail investors while management expenses has a significant negative effect on the investment decisions among the retail investors. Thus, investors should consider fund performance, fund manager’s reputation, risk perception and management expenses while making investment decisions in Kenya’s balanced funds. Fund managers should continuously improve on their skills and knowledge to always generate high returns on the balanced fund through efficient asset allocation. Lastly, Fund managers must consider the changing perceptions, especially risk perception of investors while launching new products as this will significantly help towards growing the mutual funds industry.