HIV and AIDS is wrecking lives of children in Sub- Saharan Africa. It is escalating the orphans and vulnerable children crisis in Africa, and traumatizing children, posing a great threat to their psychological well-being. The purpose of this study was to determine the adequacy of family and institutional placements in mitigating the negative impacts of trauma on the mental health of OVC. The study found the socio-economic status of OVC in families to be poorer than non OVC, and significantly higher mental health among OVC in institutions than OVC in families. Further, OVC in families had a stronger negative relationship between traumatic experiences and mental health than OVC in families. It was concluded that institutional placement was more adequate in mitigating the impacts of trauma on mental health of children than family placement. It was recommended that more programmes to support families with OVC be initiated, and models and frameworks be developed to guard against abuse and misuse of institutions for caring for OVC.