The Pakistan Credit Rating Agency Limited
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Afnan Iqbal

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PACRA Upgrades Stability Rating of NBP Islamic Savings Fund

Rating Type Stability Rating
(23-Sep-20 )
(17-Apr-20 )
Action Upgrade Maintain
Long Term AA-(f) A-(f)
Short Term - -
Outlook Stable Stable
Rating Watch - -

The rating captures the essence of change in the investment policy framework of the fund. This has reduced the overall risk profile of the fund. The fund has mandate to invest primarily in Shariah compliant money market instruments and bank deposits. The fund will invest in money market instruments rated 'AA-' and above. The placement of funds in Riba free deposits with Islamic banks/Islamic window of conventional banks, other than TDR, will be in higher of the 'A' spectrum. The credit risk is expected to remain on the lower side. At the same time, the fund policy dictates higher allocation to liquid avenues. This enhances the liquidity profile of the fund. At end Jun'20, the fund had invested ~90% of funds with banks and DFI's mostly rated 'AA-' and above. The fund also had an exposure of ~10% in Islamic commercial papers rated 'AA+' and above. The unit holding pattern of the fund is properly diversified, top ten investors represent ~17% of the funds assets which reduces the redemption pressure.
Going forward, the fund intends to maintain its current asset allocation and the deposit with banks will be made in low credit risk avenues (mostly in AA category and occasionally higher spectrum of A). 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
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 Private Limited 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, CFA and family also holds a 10% stake in the company.

The Company’s nine-member Board of Directors includes three independent directors and the CEO. With overall assets under management of ~PKR 126,853mln at end Jun'20, the Company is currently managing twenty seven open-end funds and two voluntary pension schemes.

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.