PACRA Assigns Initial Stability Rating to Alfalah Financial Sector Income Fund

Alfalah Asset Management Limited has recently launched the Alfalah Financial Sector Income Fund (or "AFSIF") to make its portfolio more diverse and meaningful for its investors. Alfalah Financial Sector Income Fund (or the 'Fund') is a low-risk profile Fund. The objective of the Alfalah Financial Sector Income Fund is to provide income enhancement and preservation of capital by offering different plans that will invest in prime quality Financial Sector TFCs/Sukuks, Bank deposits, spread transactions, and short-term money market instruments. The Fund's good credit quality and sound liquidity profile emanate primarily from its mandate to invest in bank deposits and other low-duration avenues. As per the investment policy, the weighted average time to maturity of the net assets shall not exceed 4 years and this condition shall not apply to securities issued by the Federal Government. As of Oct'23, the fund's assets were allocated 18.7% to 'Govt Sec'(1-year Ijarah sukuk), 41.1% deposits in A rated and 37% deposits in A+ and above rated. The WAM of the fund is 383 days at the end of Oct'23, exposing the fund to high credit risk. The duration of the Fund remained 192 days, at the end Oct'23, hence the fund's exposure to interest rate risk is high. The funds unit holding pattern is highly concentrated with top 10 investors representing ~81.13% of the net assets, which exposes the fund to high level of redemption pressure, however related party exposure would give comfort.
Going forward, any material changes in the funds asset allocation strategy, impacting its credit quality and/or exposure to interest rate risk, would affect the rating. While compliance with the rating criteria for the assigned rating would remain imperative.

About the Entity
Alfalah Asset Management Limited (Formerly: Alfalah GHP Investment Management Limited) was incorporated on October 18, 2004 as an unlisted public limited company and is licensed by the Securities and Exchange Commission of Pakistan to manage open-ended mutual funds and offer investment advisory services. The Company was established as joint venture Non-Banking Finance Company by Bank Alfalah Limited and GHP Arbitrium. The Company provides a wide range of mutual funds and pension funds both in conventional and Shariah compliant category. The Company also provides investment advisory services to HNW individuals and corporate clients.
The Company’s board of directors comprises eight members including the Chairman and the Chief Executive Officer. The board is dominated by representatives of MAB Investments and Bank Alfalah Limited. The board has two independent and five non-executive directors. The board members possess strong profile and skills suited to the financial services industry. Assets under management of the Company stood at ~PKR 133.8bln at end Oct'23.