The Pakistan Credit Rating Agency Limited
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Afnan Iqbal

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PACRA Maintains Stability Rating of Pakistan Income Enhancement Fund

Rating Type Stability Rating
Action Maintain Maintain
Long Term A+(f) A+(f)
Short Term - -
Outlook Stable Stable
Rating Watch - -

The fund aims to provide optimum returns through active management of aggressive investment strategy in debt and fixed income market. As per the investment policy, at least 10% of the Net Assets of the fund shall be invested in cash and near cash instruments which include cash in bank account (excluding TDR) and treasury bills not exceeding 90 days maturity. This enhances the liquidity profile of the fund. Weighted average time to maturity of the Net Assets shall not exceed 5 years and this condition does not apply to securities issued by the GoP. There is no restriction regarding time to maturity of any single security in the Portfolio. The assigned rating reflects the moderate strength of the fund's credit and interest rate risk profile. At end Dec'20, ~30% of fund's assets were invested with banks primarily rated 'A+' and above and ~26% of assets were allocated to TFCs/Sukuks rated 'AA' and above. The fund also had an exposure of ~30% in spread transactions. The unit holding pattern of the fund is moderately concentrated with top ten investors representing ~39% of the fund's assets, which exposes the fund to low level of redemption pressure.
Going forward, the fund may increase its asset allocation towards banks and short-term government papers, depending on market circumstances. Material changes in the fund's asset allocation strategy, impacting its credit quality and/or exposure to interest rate risk, would affect the rating.

About the Entity
MCB-Arif Habib Limited Savings and Investments Limited (MCB-AH or the "Company") is a public listed company, regulated by the SECP. MCB-AH holds licenses for Asset Management, Investment Advisory and Pension Fund Management. MCB-AH was incorporated in 2000 as Arif Habib Investments Limited and subsequently merged with MCB Asset Management Company in 2011, with the objective of achieving synergies in asset management business and access to a wider distribution network. Pursuant to the merger, name of the Company was changed to MCB-Arif Habib Savings and Investments Limited. MCB-AH caters to both conventional and Shariah compliant clientele and is currently managing a diverse product slate of fifteen open end funds and two voluntary pension schemes. MCB-AH is also managing one the largest AUMs under SMA segment and holds significant position in the investment advisory domain.

The major shareholders of MCB-AH are MCB Bank Limited ~51%, Arif Habib Corporation Limited ~30% and Adamjee Insurance Company Limited ~8%. The general public holds remaining ~11% of the shares. MCB-AH's control vests in eight member board of directors, including the CEO. There are four non-executive directors, while three directors are independent. The AUMs (CIS & VPS) of MCB-AH increased to ~PKR 82,721mln at end Dec'20 (Jun'20: ~PKR 66,210mln).

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.