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
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 Financial Sector Income Fund
| Rating Type | Stability Rating | |
|
Current (12-Jul-17 ) |
Previous (09-Dec-16 ) |
|
| Action | Maintain | Maintain |
| Long Term | A+(f) | A+(f) |
| Short Term | - | - |
| Outlook | Stable | Stable |
| Rating Watch | - | - |
The investment mandate of the fund is to earn a reasonable rate of return with minimal risk while ensuring capital protection by investing in a portfolio primarily comprising bank deposits and money market instruments.
The rating reflects the fund's strong credit quality, modest liquidity profile and its mandate of maintaining minimum exposure of 70% at all times in the financial sector. At end-May 17, the portfolio of the fund was primarily invested with as banking deposits (33%) and bank placements (15%). This exposure is mainly with banks rated 'A+' and above. The remaining assets of the fund were invested with debt securities (TFCs: 47% - AA- or above) and money market instruments (CP: 3.5%). Exposure to interest rate risk is moderate as duration of the fund did not exceed 19 days. The unit holding pattern of the fund is moderately concentrated with top10 investors representing 49% of the fund's assets.
Going forward, the fund plans to keep its allocation to debt instruments (45%), while the remaining assets will be invested in bank (35%) with rating 'A' & above and government securities (20%). Material changes in the fund's asset allocation strategy, which could negatively impact the fund's credit quality and exposure to interest rate risk, remain critical for the rating.
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.