Mediating Effect of Strategic Optimal Portfolio Mix on The Influence of Portfolio Diversification and Financial Performance of Private Voluntary Pension Schemes in Kenya
DOI:
https://doi.org/10.53819/81018102t3167Abstract
Private voluntary pension schemes in Kenya are instrumental in providing supplementary retirement income and fostering long-term savings for members beyond mandatory public systems. However, these schemes continue to face substantial challenges in achieving consistent positive real returns therefore the study sought to assess the mediating effect of strategic optimal portfolio mix on the influence of portfolio diversification and financial performance of private voluntary pension schemes in Kenya. The study was anchored on Black-Litterman Theory, which blends investor views with market equilibrium returns to produce stable, intuitive, and diversified portfolios suitable for pension funds. A descriptive research design was adopted. The unit of analysis was 22 voluntary pension schemes and 28 registered umbrella retirement benefits schemes. The unit of observation was 50 finance managers, 50 investments officers and 50 fund managers. Since the study population is manageable the study adopted census technique to incorporate all the 150 respondents. Primary data were collected via self-administered semi-structured questionnaires, while secondary data on return on investment were sourced from annual financial statements covering 2019–2023. Instrument reliability and validity were established through a pilot test involving 15 respondents from five selected schemes, with Cronbach’s Alpha values above 0.7 confirming internal consistency. Data analysis utilized descriptive statistics and inferential statistics, with diagnostic tests (normality, multicollinearity, homoscedasticity, linearity) confirming model assumptions. From the findings the P-values were less than 0.05 confidence level therefore the study rejected the null hypothesis and based on the rule of significance, the study concluded that strategic optimal mix has a significant mediating effect on the relationship between portfolio diversification and financial performance of private voluntary pension schemes in Kenya. Accordingly, it is recommended that pension schemes invest in continuous professional development of finance officers on portfolio optimization and adopt formal policies encouraging diversification across asset classes to balance risk and return while safeguarding member interests.
Keywords: Strategic Optimal, Portfolio Mix, Portfolio Diversification, Financial Performance, Private Voluntary, Pension Schemes
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