The Pakistan Credit Rating Agency Limited
18-Apr-19
Analyst
Muhammad Usman
muhammad.usman@pacra.com
+92-42-35869504
www.pacra.com
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Related Research
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PACRA Maintains Stability Rating of NAFA Financial Sector Income 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 provide income enhancement and preservation of capital by investing in prime quality Financial Sector TFCs/Sukuks, Bank deposits and short-term money market instruments.
The rating reflects the fund's average credit quality, good liquidity profile and its mandate of maintaining minimum exposure of ~70% at all times in the financial sector. At end-Dec 18, the portfolio of the fund was primarily invested with bank deposits and placements ~77%. This exposure is mainly with banks rated 'A' and above. The remaining assets of the fund were invested with debt securities (TFCs: ~21% "A+" and above). Exposure to interest rate risk is low as the duration of the fund is 37 days. The unit holding pattern of the fund is moderately concentrated with top 10 investors representing ~42% of the fund's assets.
Going forward, the fund plans to keep its allocation to debt instruments, while the remaining assets will be invested in banks with rating 'A' and above. 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.