EFFECTS OF INVESTMENT STRATEGIES ON FINANCIAL PERFORMANCE OF PRIVATE EQUITY FUNDS INVESTING IN KENYA

MUTHOMI JOSEPH MUNYA

Abstract


Globally, private equity (PE) investing has evolved extensively to become a significant industry compared to the small niche market it used to be. It is considered to play a crucial role in the economy, by boosting innovation and growth in promising start-ups or expanding firms, as well as by fostering the restructuring of mature companies. Private equity has become an increasingly important alternative asset class for institutional investors as it may offer return as well as diversification benefits relative to traditional stock and bond market investments. This study sought to assess the effects of investment strategies on the financial performance of private equity funds investing in Kenya. The study targeted all the funds managed by the 20 private equity fund investment management companies in Kenya. The study adopted a descriptive survey research design. The study was carried out for a period of 5 years, starting from year 2013 to year 2017. Data was sourced from the reports and websites of the various fund management companies as well as from the CMA website and the NSE website. After collection of data and testing for reliability, the data was coded and analysed with the aid of the Statistical Package for Social Sciences (SPSS). Descriptive statistics and inferential statistics were used to establish the relationship between the variables. Linear regression was carried out to test the influence of the various investment strategies on the financial performance of the private equity funds.  The study found that 79.8% of the financial performance of private equity funds investing in Kenya could be accounted for by leveraged buyouts, venture capital, and mezzanine financing. The study also revealed that there was a strong positive relationship between financial performance and leveraged buyouts, venture capital, and mezzanine financing. The study further revealed that leveraged buyouts significantly affected financial performance of private equity funds investing in Kenya.


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