Effect of Investment Diversification in Real Estate on the Financial Performance of Retirement Benefits Schemes in Kenya

Abstract

Purpose: Prudence investment calls for investment diversification so as to subvert the tendon of subpar performances. The study investigated the effect of investment diversification in real estate on the financial performance of the retirement benefits schemes in Kenya. The study further investigated the moderating effect of the foreign exchange rate on the relationship between the independent and the dependent variable. Methodology: The study embraced a descriptive research design and the study population constituted of 87 retirement benefits schemes. The stratified random sampling technique used resulted into having 72 units of analysis. Primary and secondary quantitative data were employed in this study. The primary data was collected using questionnaires, whereas the secondary data was collected via data observation schedules. Data analysis was through the regression model enshrined in the statistical package for social sciences version 20. Findings: The hypothesis testing led to the rejection of H01, and H02. The rejection H01 confirmed that investment diversification in real estate has a significant positive effect on the financial performance of the retirement benefits schemes in Kenya. The rejection of H02 confirmed that foreign exchange rate has a significant positive moderating effect on the relationship between investment diversification in real estate and the financial performance of the retirement benefits schemes in Kenya. Unique Contribution to Theory, Practice and Policy: The study supported the Modern Portfolio Theory (MPT) which advocates for investors to build optimal investment portfolios out of the risky assets at their disposal through diversification so as to arrive at an optimal investment portfolio. The concept of investment diversification is essential since it presents investors with an opportunity of not losing everything, since when one asset within their portfolio fails, the loss may be borne by the other assets within the same investment portfolio which will have posted positive returns on investment. The study recommends that the retirement benefits authority should devise policies which support investment diversification in the retirement benefits schemes.