The Pakistan Credit Rating Agency Limited
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Afnan Iqbal

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PACRA Assigns Initial Stability Rating to NBP Islamic Income Fund

Rating Type Stability Rating
(20-Jul-20 )
Action Initial
Long Term A(f)
Short Term -
Outlook Stable
Rating Watch -

The assigned rating reflects the fund's moderate credit risk and interest rate risk profile emanating from its investment strategy to invest in adequate credit quality and longer duration investment avenues having sound liquidity. The fund aims to place 40% of assets with commercial banks rated 'AA-' and above, 20% allocation will be made in GoP Ijara Sukuk, 20% of the funds will be placed with DFI's rated 'AA-' and above, and 20% exposure will be provided to corporate Sukuks with 'AA-' and above rating. As per the investment policy guidelines, the fund shall place minimum 25% of assets in Riba free Islamic bank accounts. This is expected to allow the fund to maintain a strong liquidity profile. The fund is projected to have a duration of 180 days and weighted average time to maturity of 730 days at launch. However, as per the investment policy guidelines, the weighted average time to maturity of the fund shall not exceed 4 Years. Benchmark return of fund will be the 6-month average deposit rate of 3 'A' rated Islamic banks/Islamic windows of conventional banks.
Going forward, the fund intends to maintain its current asset allocation and credit quality of the investment avenues. 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
NBP Fund Management Limited (or the "Company"), 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%. In 2019, Baltoro Growth Fund has acquired the entire 36% stake of Alexandra Fund Management Private Limited in the Company. Baltoro Capital is a Pakistan focused private equity firm. Baltoro Capital has made investments in the pharmaceutical, renewable energy and financial services sectors in Pakistan. 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 a diversified fund slate of twenty seven open-end funds and two voluntary pension schemes under twelve different categories.

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.