Investment Diversification in Equities and Financial Performance of Pension Schemes in Kenya
DOI:
https://doi.org/10.53819/81018102t5336Abstract
The general objective of the study was to investigate the effect of investment diversification in equities on the financial performance of Pension schemes in Kenya. The study further examined the moderating effect of foreign exchange rate on the relationship between investment diversification in equities and financial performance. The study adopted the descriptive research design. The population employed comprised of 421 Pension schemes. The stratified random sampling technique used resulted into having 206 units of analysis. Primary and secondary quantitative data were employed in this study. Data analysis was through the statistical package for social sciences. The hypothesis testing led to the rejection of H01, thus depicting that investment diversification in equities has a significant positive effect on the financial performance of the Pension schemes in Kenya. The hypothesis testing for the moderated relationship model led to the rejection of H02, thus confirming that foreign exchange rate has a significant positive moderating effect on the relationship between investment diversification in equities and the financial performance of the Pension schemes in Kenya. The study concludes that investment diversification in equities has a significant positive effect on the financial performance of Pension schemes in Kenya. Furthermore, the study concludes that foreign exchange rates play a significant moderating role in the relationship between investment diversification in equities and financial performance. The study recommends that the Pension schemes should consider diversifying their investments in equities because it affects their financial performance. In addition, schemes should be vigilant on the volatility of the foreign exchange rate because it has a moderating effect on the relationship between the investment diversification in equities and their financial performance. Schemes should also establish robust monitoring systems to regularly evaluate the performance of their diversified equity portfolios and make adjustments as necessary. Furthermore, Pension schemes should invest in enhancing the financial literacy and expertise of their management teams and investment committees, particularly in areas related to equity diversification and foreign exchange risk management.
Keywords: Investments, Diversification, Equities, Financial Performance, Pension Schemes, Portfolio
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