The Effects of Portfolio Management Strategies on Financial Performance of Investments Companies in Kenya: a Case Study of Centum Investments

Abstract

The aim of this study was to establish portfolio management strategies used by Centum Investments and to determine the effects of portfolio management strategies on financial performance of Centum investments. Data was edited, classified, coded and tabulated to analyze quantitative data using statistical package for social science (SPSS version 17). Tables were used for further representation for easy understanding and analysis. This study adopted a survey research method to show the relationship between portfolio management and performance practices. The study focused on Centum Investment. Centum Investment chosen because of its geographical coverage, large customer base, profitability levels and easy of access to information. The study used secondary data. The secondary data was collected from the financial statements of Centum and books to collect information on annual earnings of the Centum. The data was summarized, coded and tabulated.

The findings also showed that that Individual security selection strategies were not positively correlated to the Leverage strategies and Yield spread strategies with -0695 and -0.639 respectively. Individual security selection and Yield curve strategies were positively correlated as shown with 0.349 at 0.001 significance level. The findings also indicate a positive correlation between the Yield curve strategies and Yield spread strategies as shown by 0.783 at 0.001 significance level. The findings of the study revealed a strong correlation between the predictor‘s variables (Leverage strategies, Yield spread strategies, Interest rates expectation strategies, Individual security selection strategies and Yield curve strategies). An F ratio is calculated which represents the variance between the groups, divided by the variance within the groups. The results indicated that there is more variability between the groups (caused by the independent variable) than there is within each group.

Based on the findings, division managers, portfolio managers, and client service officers should use a management information system that generates portfolio information reports either in hard copy or on-line. Most computer-based portfolio management systems allow the user to perform asset allocation modeling, investment simulation, compliance monitoring, re- balancing, trading interface, benchmarking, client statement preparation and presentation, real-time valuation, and investment risk analysis. Portfolio managers should be required to periodically verify that investment performance reports are accurate and that investment

policy compliance statements are updated whenever a material change occurs. This process should be accompanied by random or other internal reviews of investment activity and portfolio holdings to verify compliance with investment policy.