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 NAFA Saving Plus 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 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 fund's strong credit quality, sound liquidity profile. The fund's low risk emanates from its investment policy of maintaining a sizeable proportion of term placements with commercial banks pre dominantly rated in 'AA-' category and above. At end-May 17, fund's exposure with Bank was 40.6%, placements with banks was 19.1%, MTS was 33.6% and T-Bills was 5.6%. Exposure with banks was rated 'A-' & above. The majority of the exposure was with 'AA-' rated banks (i.e. 28%). The other major avenue is MTS, which due to self-liquidating nature possesses less risk over short tenure. The fund's unit holding pattern remains adequately diversified with top10 investors representing 49% of the fund's assets at end-May-17.
Going forward, the fund intends to maintain its investments in Government securities (20%), Margin Financing (40%) with rest of the assets invested in cash and placements with good quality banks and NBFIs. 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.