A survey of the challenges to funds mobilization by unit trusts in Kenya

Abstract

Unit Trust is an open-ended investment scheme, which enables individual investors to pool their money into funds which can be invested in a wide range of suitable stock market investments or money market instruments. A trust is an agreement where a person gives his property to another to hold on trust for the benefit of a third party or an object called the beneficiary. Tn the contemporary market place, a UT is initiated by a professional fund management company commonly called 'manager' .58 It is constituted by a trust deed executed between a manager and a trustee, which provides that assets of investors, commonly called the unit holders, will be held as directed by the manager in accordance with the terms of the trust deed. Unit trusts are positioned as an advanced investment to small savers which offers a diversified asset portfolio for investors, who, may participate as individuals or jointly. In this respect, medium businesses would purchase unit trust products and distribute returns to members as dividends or retained earnings. The purpose of this study is to investigate the challenges to funds mobilization by unit trusts in Kenya. This study therefore, sought to specifically determine the effects of innovation, interest rates and business environment on funds mobilization by unit trusts. The study used a descriptive research design. The target population was drawn from the 16 registered unit trusts and fund managers based in Nairobi who are actively 'involved in the management of funds. Simple random sampling was used to select a size 51 respondents from the 16 unit trusts and fund managers forming the population element. The study used both primary and secondary data. Primary data was collected from respondents using a customized Likert framework questionnaire. Data was analyzed using descriptive statistics, with the help of Statistical Package for Social Science (SPSS) Version 17. Based on the objectives, the study found that the amount of income, innovation, interest rates and favorable conditions, general economic trends, political stability, stability of the institution, market trends, interest rates charged and advancement of technology affected the company in that order of reducing importance. This study recommends that the unit trusts in Kenya should carry out investor education, on the need and benefits of saving. This way, they will have enough money from their clients to invest with and that the unit trusts should look for profitable means to invest the clients' money in order for them to realize value for money