The Pakistan Credit Rating Agency Limited
12-Jul-17
Analyst
Mohsin Naseer
mohsin.naseer@pacra.com
+92-42-35869504
www.pacra.com
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Related Research
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PACRA Maintains Stability Rating of NAFA Islamic Income Fund (Formerly: NAFA Islamic Aggressive 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 objective of the fund is to earn reasonable rate of return for its unit holders by constructing a portfolio primarily invested in Shariah compliant money market and debt securities.
Currently, fund's exposure with GoP Ijara sukuk is 4%, while 94% of the fund's assets are exposed as banking deposits with banks rated 'A-' & above. Exposure with 'AAA' rated banks was 6%, exposure with 'AA' rated banks was 1%, whereas with A+ and A- rated banks exposure was 1.6% and 51% respectively at end-May 17. The unit holding pattern of the fund is reasonably concentrated with top10 investors representing 44% of the fund's total assets.
The fund intends to maintain its allocation towards bank placements (70%). The remaining assets will be invested in Shariah compliant government securities and good quality debt instruments. 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.