The Pakistan Credit Rating Agency Limited
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Ayesha Qasim

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PACRA Maintains Stability Rating of NAFA Riba Free Saving Fund

Rating Type Stability Rating
(04-Dec-18 )
(30-Jun-18 )
Action Maintain Maintain
Long Term A(f) A(f)
Short Term - -
Outlook Stable Stable
Rating Watch - -

The fund's objective is to provide preservation of capital and earn a reasonable rate of return along with a high degree of liquidity by investing in short-term Shariah-compliant banks and money market/debt securities.

The rating reflects a strong liquidity profile of the fund emanating from the maximum exposure of fund as cash balances. At end-Jun 18, 97% of the fund's assets were placed as cash balances with various commercial banks, with a minimum rating of 'A-', 41% of the funds were invested with banks rated ‘AAA’. Remaining assets of the fund were invested in GoP Ijara Sukuks. The unit holding pattern of the fund is concentrated with top 10 investors representing 42% of the fund's assets which exposes the fund to a low level of redemption pressure.

Going forward the fund intends to enhance the share of GoP Ijarah Sukuks and Islamic commercial papers in the portfolio while keeping rest of the assets as daily cash balances and placements with 'A-' and above-rated banks. Material changes in the fund's asset allocation strategy, which could negatively impact the fund's credit quality and exposure to interest rate risk, remains critical for the rating.

About the Entity
NBP Fund Management Limited (Formerly: NBP Fullerton Asset Management Limited), established in 2005, is licensed by Securities and Exchange Commission (SECP) to carry out asset management and investment advisory business. NBP is the largest shareholder of the AMC with a stake of ~54%, followed by Baltoro Growth Fund ~36% stake which they acquired from Alexandra Fund Management Pte. Ltd. The CEO of NBP Fund Management Limited, Dr. Amjad Waheed, also holds a 10% stake in the company.

The company’s nine-member Board of Directors include three independent directors and the CEO. During the year Mr. Mudassir Husain Khan and Mr. Tariq Jamali joined the company’s board as a Non-Executive director, both are the representatives of the bank. The company is currently managing a diversified fund slate of twenty-five funds.

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.