Analyst
Muhammad Usman
muhammad.usman@pacra.com
+92-42-35869504
www.pacra.com
Applicable Criteria
Related Research
PACRA Maintains Stability Rating of NAFA Active Allocation Riba Free Savings Fund
Rating Type | Stability Rating | |
Current (18-Apr-19 ) |
Previous (04-Dec-18 ) |
|
Action | Maintain | Maintain |
Long Term | A-(f) | A-(f) |
Short Term | - | - |
Outlook | Stable | Stable |
Rating Watch | - | - |
The fund's objective is to earn a reasonable rate of return along with a high degree of liquidity by investing in short-term Shariah-compliant bank deposits and money market/debt securities.
The rating reflects average credit quality of the fund. Currently, 'NAFA Islamic Active Allocation Plan I', 'NAFA Islamic Active Allocation Plan II', 'NAFA Islamic Active Allocation Plan III', ‘NAFA Islamic Active Allocation Plan IV’, ‘NAFA Islamic Active Allocation Plan V’, ‘NAFA Islamic Active Allocation Plan Vl’, ‘NAFA Islamic Active Allocation Plan Vll’ and ‘NAFA Islamic Active Allocation Plan VIll’ have invested their fixed income portions in this fund. The unit holding pattern of the fund is concentrated with top 10 investors representing 100% of the fund's assets, (of which all of the investments are owned investments) which exposes the fund to a very low level of redemption pressure. Fund has ~6% exposure in GoP Ijara sukuks, 'AAA' rated bank (18%), 'AA-' rated bank (14%) and A- rated bank (50%) at end-Dec18.
Going forward the fund intends to increase its exposure in GoP Ijarah Sukuks whilst remaining assets would be placed as good quality commercial papers and 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, established in 2005, is licensed by Securities and Exchange Commission (SECP) to carry out asset management and investment advisory business. National Bank of Pakistan is the largest shareholder of the company with a stake of ~54%. During the year, Baltoro Growth Fund acquired the entire (36%) stake of Alexandra Fund Management Pte. Ltd. in the company. Baltoro Capital is a Pakistan focused private equity firm. Baltoro has made three investments in the pharmaceutical, renewable energy and financial services sectors. It is actively deploying its funds in businesses positioned to achieve extraordinary growth. 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, there has been some new induction in the Board of Directors. The company is currently managing a diversified fund slate of twenty-six mutual funds and two pension funds.