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The Pakistan Credit Rating Agency Limited
Press Release

Date
12-Jul-17

Analyst
Mohsin Naseer
mohsin.naseer@pacra.com
+92-42-35869504
www.pacra.com

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This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to PACRA

PACRA Maintains Stability Rating of NAFA Government Securities Liquid Fund

Rating Type Stability Rating
Current
(12-Jul-17)
Previous
(09-Dec-16)
Action Maintain Maintain
Long Term AAA(f) AAA(f)
Short Term - -
Outlook Stable Stable
Rating Watch - -

The fund's mandate is to generate optimal return with minimum risk, to provide liquidity and reasonable income to its unit holders by investing primarily in short-term Government Securities.

The rating reflects strong credit quality of the fund. This emanates from maintaining a high exposure to government securities and low duration against interest rate risk. The fund continued to remain heavily invested in GoP securities. Fund's average exposure towards interest rate risk was sizeable minimal. In May-17, the average duration of the fund was 31 days. This has provided immaculate shield to the fund's NAV against risk of volatility affecting its pricing. The unit holding pattern of the fund emanates high liquidity risk as top 10 investors represents 67% of the fund's assets at end-May 17, making it vulnerable to redemption pressure.

Going forward, the rating remains dependent on maintaining at least 70% allocation towards AAA exposure with portfolio duration not exceeding 45 days. Meanwhile, the remaining assets of the fund must be placed with scheduled banks having very strong credit quality. PACRA would monitor compliance against agreed parameters on monthly average basis.

About the Entity
NAFA was incorporated in August 2005. National Bank of Pakistan (NBP) is the major shareholder of NAFA with 54% stake, followed by Alexandra Fund Management Pte. Ltd - 36% stake. With an asset base of PKR ~2trl at end-Dec16, NBP is the one of the country's largest commercial bank. The CEO of NAFA holds a stake of 10% in the company. Presently, the company is managing a diversified portfolio of 22 open-end funds (12 Shariah compliant & 10 conventional), two pension schemes and several discretionary portfolios with AUM of PKR 109bln at end May-17.

NAFA’s nine-member BoD comprises the company’s CEO, three representatives of NBP, two representatives of Alexandra Fund and three independent directors. During the year Mr. Nausherwan Adil – Senior Executive Vice President & Group Chief Operations of NBP, is the chairman of the board. The founding CEO, Dr. Amjad Waheed, CFA, holds a Doctorate in Business Administration; he has extensive experience in domestic and international capital markets. He is supported by an experienced and qualified team of professionals.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.