FINANCIAL TECHNOLOGY, FUND SIZE AND PERFORMANCE OF UNIT TRUST FUNDS IN KENYA

Abstract

The Kenyan Unit Trust Funds play an integral role in economic development therefore its financial performance becomes a very critical indicator of investment efficiency and market stability in Kenya. The emergence of financial technology (FinTech) has revolutionized the global financial landscape by enhancing efficiency, inclusivity, and accessibility. However, its effect unit trust funds in Kenya remains underexplored and insufficiently documented and understood. This study was motivated by the increasing digital transformation and the need to understand how FinTech applications and fund size interact to jointly influence fund performance within Kenyan Unit Trust Funds. The study examined the effect of Fintech integration on financial performance of unit trust funds, focusing on the moderating role of fund size. Four FinTech constructs; digital payments, digital deposits, digital portfolio management, and digital risk management were used as predictors of performance. Theoretically, the study was grounded on the Technology Acceptance Model, Financial Intermediation Theory, Profit Maximization Theory, and the Capital Asset Pricing Model. Mixed-methods design of descriptive and panel designs was employed, integrating primary data from fund managers with secondary data from audited reports of licensed UTFs. Primary data were collected through questionnaires administered to fund managers, while secondary data were extracted from audited fund reports and regulatory filings. Analysis was conducted using SPSS for descriptive statistics and STATA for panel estimations, with Return on Assets (ROA) as the main performance indicator. The estimation model passed key diagnostic tests for normality, multicollinearity, stationarity, autocorrelation, and heteroskedasticity model fit test. Hypotheses were tested a 5% significance level, Findings revealed that FinTech significantly enhances data fund performance of UTFs. Primary data: Y=0.053+0.279X1+0.220X2+0.287X3+0.230X4, with all p-values <0.05. at 95% CI while secondary � � =−4.01971+0.040847𝑋1 +0.018446𝑋2 +0.16416𝑋3 + 0.051229𝑋4 with all P-values < 0.05 at 95% CI. Fund size significantly moderated the relationship between digital portfolio management and fund performance, indicating that larger funds derive greater benefits from FinTech use in business models and strategies. The study concludes that fintech adoption improves operational efficiency, portfolio optimization and risk control. The study extends the Technology Acceptance Model (TAM) to an institutional investment context, offering new insights into technology performance dynamics within fund management. Practically, it guides fund managers on leveraging FinTech tools for enhanced operational efficiency and performance, while providing regulators with evidence to design policies that support digital transformation in the capital market. The Government of Kenya draws insights on enhancing digital blue print agenda, vision 2030 and financial inclusivity. Keywords: Financial technology, fund size, financial performance and Unit Trust Funds.