The Pakistan Credit Rating Agency Limited
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Shazia Afzal

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PACRA Maintains Stability Rating of NBP Riba Free Savings Fund

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

The assigned rating reflects the moderate strength of the fund's credit and interest rate risk profile. An open-end Islamic Income Fund, with the objective to provide preservation of capital with a high degree of liquidity by investing in Shariah compliant banks and money market/debt securities. As per the authorised investment policy, the fund may invest in government securities up-to 75% of the net assets with maximum 6 months duration and the policy also dictates a maximum 75% allocation in Riba free term deposits with Islamic banks. The weighted average time to maturity of net assets shall not exceed four years excluding government Securities.The performance of the Scheme will be compared against a Benchmark based on 6-month average deposit rates of three A rated Islamic Banks/Islamic windows of conventional banks. The fund would primarily comprise of Shariah Compliant diversified portfolio of bank deposits, money market and sovereign debt instruments/securities. At end Dec'20, the fund had placed ~25% of funds with banks rated 'A+' and above. The remaining funds are invested in Sukuk, GoP Ijara Sukuk and commercial papers. The unit holding pattern of the fund is moderately concentrated, top ten investors represent ~29% of the funds assets which reduces the redemption pressure.
Going forward, in accordance with the investment policy the fund may increase its exposure in CP and invest the remaining assets with banks while keeping under consideration the market expectation. 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 163,473mln at end-Dec'20, the Company is currently managing a diversified fund slate of twenty eight open-end mutual funds, two voluntary pension schemes and an Exchange Traded Fund.

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.