PACRA Maintains Stability Rating of Alfalah Islamic Sovereign Fund

Alfalah Islamic Sovereign Fund (“A-ISF” or “the Fund”) operates with a medium risk profile, in line with its investment objective of generating competitive returns with relatively low risk through investments primarily in Shariah-compliant government securities, short-term Sukuks/commercial papers, and placements with Islamic banks and licensed Islamic banking windows of conventional banks. The Fund comprises three investment plans, each structured to cater to varying investor preferences within the same Shariah-compliant sovereign investment mandate. Notably, the plan structure has remained unchanged since the previous review, reflecting stability in the Fund’s strategic positioning and product offering. As of September 2025, the Fund reported an AUM of PKR 11,158 million, reflecting its established footprint in the Islamic sovereign fund segment. In terms of asset allocation, the Fund remained largely invested in sovereign-linked instruments, with approximately 77% allocated to government-guaranteed securities, ~15% placed under Baimuajjal arrangements, ~6% maintained as cash, and the remaining ~2% invested in other approved avenues. This allocation underscores the Fund’s emphasis on sovereign exposure while maintaining an adequate level of liquidity to meet operational and redemption requirements. From a credit quality perspective, the portfolio remained strong, with approximately 93% invested in Government/AAA rated instruments, ~5% in AA+ rated avenues, ~0.04% in AA rated instruments, and the balance in other permissible exposures, fully aligned with the Fund’s investment mandate and risk appetite. At end-Sep’25, the Fund’s Weighted Average Maturity (WAM) stood at 302 days, exposing the Fund to moderate levels of interest rate and credit risk. The maturity profile reflects the Fund’s strategy of enhancing returns through relatively longer-dated sovereign instruments within Shariah-compliant limits. The unit holding pattern, however, remained highly concentrated, with the top 10 investors accounting for approximately 95% of total units as of end-September 2025. While this concentration elevates the Fund’s exposure to potential redemption pressure, the associated liquidity risk is partially mitigated by the Fund’s high-quality sovereign asset base, significant allocation to government-guaranteed instruments, and the availability of liquid placements. Consequently, despite the elevated concentration risk, the overall risk profile of the Fund remains commensurate with the assigned rating, supporting the maintenance of the rating at its current level.
Going forward, any material changes in the investment policy or the devised rating criteria for the assigned rating would have an impact on the rating.

About the Entity
Alfalah Asset 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 (Mr. Atif Aslam Bajwa) and the Chief Executive Officer (Mr. Khaldoon Bin Latif). 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 320bln at end Sep'25.