The Pakistan Credit Rating Agency Limited
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Shazia Afzal

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PACRA Maintains Stability Rating of NBP Mahana Amdani Fund

Rating Type Stability Rating
Action Maintain Maintain
Long Term AA-(f) AA-(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. The fund is designed to provide monthly income to investors by investing in Shariah Compliant - Money Market and Debt avenues. The profits are distributed in the form of dividend on Quarterly basis. As per the authorised investment policy, the fund may invest in government securities up-to 75% of the net assets and the policy also dictates a minimum 25% allocation in Riba free deposits (excluding TDR). This strengthens the fund's interest rate and liquidity risk profile and also provides comfort in case of redemption pressure. The investment policy allows the fund to take 100% exposure in 'A-' rated banks which puts a dent in the fund's credit quality. The weighted average time to maturity of net assets shall not exceed one year excluding government Securities. At end-Dec'20, ~50% of the fund's assets were invested in banks other than TDR, primarily rated 'AAA' and 'A-' and ~12% of funds were placed with banks rated 'AAA' and 'A+'. The remaining funds were exposed to commercial papers and Sukuks rated 'AA' and above including GoP - Ijara Sukuk. The fund's unit holding pattern is adequately diversified with top ten investors representing ~25% of the net assets which expose the fund to a low level of redemption pressure. The benchmark of the fund is 6-month average deposit rates of three 'A' rated Islamic banks/Islamic windows of conventional banks.
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.