Analyst
Madiha Sohail
madiha.sohail@pacra.com
+92-42-35869504
www.pacra.com
Applicable Criteria
Related Research
PACRA Upgrades Asset Manager Rating of Alfalah Asset Management Limited
Rating Type | Asset Manager | |
Current (30-Aug-24 ) |
Previous (31-Aug-23 ) |
|
Action | Upgrade | Upgrade |
AM Rating | AM1 | AM2++ |
Outlook | Stable | Stable |
Rating Watch | - | - |
Alfalah Asset Management Limited's (the "AMC" or "AAML") is amongst the largest leading players in the AMC industry, supported by a strong control environment, structured investment processes, good governance framework, and qualified management team. The assigned rating takes into account improvement across key performance areas including investment management, fund performance, control framework, growth & diversity in assets under management and a strong brand name along with digital excellence. Alfalah is currently managing a diverse fund slate of twenty nine funds under different categories, including CIS, voluntary pension scheme and exchange traded scheme. Considering the high interest rate environment during FY24, the fund slate is tilted more towards money market funds with ~74% of total assets concentrated in this category (Islamic and conventional). Since FY23, the AUMs base of the Company mounted significantly by ~85% to PKR 189bln as of FY24 (FY23: PKR 102bln), while the industry grew by ~67%. Resultantly, the market share increased to 7.1% as of FY24 (FY23: 6.5%). Since FY23, AMC has launched multiple plans under the fixed rate/return category both Islamic and conventional, which have contributed to the overall AUMs growth of AMC. The AMC remained high highly focused on increasing the retail penetration, which is adding stickiness and longevity in its AUM base. The current AUM mix depicts an adequate retail vs. corporate ratio of 43:57. inclusive of HNWIs. While the funds' performance remained well above satisfactory levels with majority of the funds performed positively in comparison to the benchmark. As an investment advisor, the AMC is managing 11 SMA accounts under a discretionary and non discretionary portfolio. The digital platform is also being strengthened for better retail penetration, enhanced customer services and to create synergies with the parent bank.
The management fee of the Company improved to PKR 245mln during 3MCY24 (3MCY23: PKR 95mln). The profit after tax stood at PKR 61mln during the 3MCY24 (3MCY23: PKR 31mln). The equity of the Company stood at PKR 1.9bln at the end Mar'24 (CY23: PKR 1.8bln), which is well above the minimum capital requirement. The ratings find comfort from the Company's association with Bank Alfalah Limited and potential synergies due to the established presence of the sponsor bank's branch network. In Jun'24, the rating of Bank Alfalah Limited was upgraded to "AAA" from "AA+". AUM inflows over the period reached ~32% of the total current AUMs enabled by the Bank.
Sustainable profitability, market share, and fund performance would provide support to the ratings. While materialization of the initiatives as represented by the management would remain imperative to the ratings.
About
the Entity
Alfalah Asset Management Limited was incorporated on Oct 18, 2004 as an unlisted public limited company and is licensed by SECP to manage open-ended mutual funds, offer investment advisory services, manage pension funds, conduct REIT and Private Funds managed businesses. The Company's current ownership structure stands with MAB Investments Inc. (~59.8%) and BAFL (~40.2%). The Company’s board of directors comprise eight members including the Chairman. Mr. Atif Bajwa has chaired the Board. He has an extensive international career spanning more than 40 years of executive leadership roles in banking, and of multiple boards and public interest positions. The CEO - Khuldoon Bin Latif has joined the AMC in Mar'23 and has diversified experience in capital markets for over 19 years.