Abstract:
This paper explores the investment management structures of institutional investors in Kenya.
The investment management approach of three main categories of institutional investors with
significant activity in the market, namely, unit trusts, retirement benefits funds and insurance
companies is investigated. The choice of the investment management structure is a critical first
step in the investment decision making process of an investor. Using desk top analysis of various
reports and key informant telephone interviews, the research identifies two main investment
management structures being used by these institutional investors. The study uses a random
sample from among the entities in each category. In house investment management structure
where part or the entire portfolio of assets is managed by internal teams was found to be in use
by 20% of insurance companies. No unit trusts used this approach but one retirement benefits
scheme was found to manage part of its assets internally. As a means to comply with regulations,
virtually all retirement benefits funds used delegated investment management model. Delegation
among pension funds took the form of separately managed accounts (SMA) and guaranteed
funds. 80% of Insurance companies delegated investment management through SMAs. This
paper recommends the relaxation of compliance based rules on investment management to allow
fiduciaries exercise greater control and discretion in the selection of investment management
approaches.
