PACRA Assigns Initial Stability Rating to Alfalah Islamic Sovereign Fund

In order to reap the benefits of a high-interest rate environment, Alfalah Asset Management Limited recently launched the Alfalah Islamic Sovereign Fund (or "AISF") dated September 26, 2023 to make its portfolio more diverse and meaningful for its investors. Alfalah Islamic Sovereign Fund (or the 'Fund') is a low-risk profile Fund. Currently, there are 4 funds, under this category with the AUM size of 56.75bln. While Alfalah Islamic Sovereign Fund is comprising of 11.42%. The Objective of the fund is to seek the maximum possible preservation of capital and a reasonable rate of return from a portfolio of medium risk by investing in Shariah Compliant Government Securities, Shariah Compliant Deposits, Shariah Compliant sukuks / commercial paper. The rating reflects the strong strength of the Alfalah Islamic Sovereign Fund's strong credit and interest rate risk profile. The Fund's good credit quality and sound liquidity profile emanate primarily from its mandate to invest in Govt. Securities and bank deposits. 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 by the Federal Government. As of Oct'23, the fund's assets were allocated 87.9% to 'Govt Sec'(1-year Ijarah sukuk) and 13.4% deposits in AA+ rated. The WAM of the fund is 288 days as of Oct'23; exposing the fund to credit risk. The duration of the Fund remained 146 days, at the end of Oct'23 exposing the fund to interest rate risk. The funds unit holding pattern is highly concentrated with top 1 investors representing ~100% of the net assets. As per the fund manager representation, the Fund was launched in 2023 at the time of launch, the AMC itself placed money in the Fund. However, now the clientele of the Fund would be diversified by Dec’2023.
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.