The Pakistan Credit Rating Agency Limited
12-Jul-17
Analyst
Mohsin Naseer
mohsin.naseer@pacra.com
+92-42-35869504
www.pacra.com
Applicable Criteria
Related Research
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PACRA Maintains Stability Rating of MCB Pakistan Sovereign Fund
| Rating Type | Stability Rating | |
|
Current (12-Jul-17 ) |
Previous (09-Dec-16 ) |
|
| Action | Maintain | Maintain |
| Long Term | AA-(f) | AA-(f) |
| Short Term | - | - |
| Outlook | Stable | Stable |
| Rating Watch | - | - |
The fund's mandate is to generate reasonable return by primarily investing in bonds and short-term debt securities issued by Government of Pakistan (GoP).
The rating reflects the fund's strong credit quality and a sound liquidity profile emanating from the fund's policy to invest 70% of asset in a mix of short-term and long-term government securities on a weighted average basis with duration not more than 2 years. At end May-17, fund's exposure in T-Bills was 84% while 2% of the net assets were invested in PIBs. Exposure in 'AA+' rated banks was 0.5% whereas in 'AA-' rated banks, exposure was 13%. The fund's exposure towards interest rate risk is reasonably within stated mandate. The unit holding pattern of the fund is moderately concentrated, with top10 investors representing 57% of the fund's assets.
Going forward, the rating remains dependent on maintaining at least 70% allocation towards government securities with portfolio duration not exceeding 2 years. PACRA would monitor compliance against agreed parameters on monthly average basis.
About
the Entity
MCBAH is a subsidiary of MCB Bank Limited (MCB). MCB holds majority stake (51%) in the company, followed by Arif Habib Corporation Limited (30%). The company is managing fourteen open end mutual funds along with two pension schemes with AUMs of ~ PKR 47bln at end-Mar17. MCBAH also manages an SMA portfolio of ~ PKR 24bln. Sizeable chunk of this portfolio is related to an associated company. MCB, the fourth largest bank in Pakistan in terms of asset size and branch network, has a very strong financial position, evidenced by a long-term entity rating of AAA by PACRA. Arif Habib Corporation is the holding company for Arif Habib Group with interests in the financial and industrial sectors.
MCBAH’s eight members BoD, three representatives from MCB including CEO, two representatives from AHG and three are independent. Mian Muhammad Mansha - Chairman MCB - serves as the Chairman on the board. Mr. Nasim Beg - a representative of AHG - acts as the Vice Chairman. Mr. Saqib Saleem, former Chief Operating Officer and Company Secretary, is leading the AMC as Chief Executive Officer.