The Pakistan Credit Rating Agency Limited
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Afnan Iqbal

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PACRA Maintains Stability Rating of JS Islamic Income Fund

Rating Type Stability Rating
(01-Apr-21 )
(19-Oct-20 )
Action Maintain Maintain
Long Term AA-(f) AA-(f)
Short Term - -
Outlook Stable Stable
Rating Watch - -

The rating reflects the moderate strength of the fund's credit and interest rate risk profile. Minimum allocation of 25% in cash and near cash instruments provide support to the liquidity. The fund has a mandate to invest primarily in quality Sukuks, Shariah-compliant Government Securities, Shariah-compliant Bank Deposits and other Shariah-compliant debt instruments. Weighted average time to maturity of the net assets shall not exceed 4 years; however, this condition shall not apply to securities issued by the Federal Government. There is no restriction regarding time to maturity of any single asset in the portfolio or the duration of a single security in the portfolio. At end Dec'20, ~44% of fund's assets were placed with banks rated 'A+' and above, while remaining funds were allocated to TFC/Sukuks primarily rated 'AA' and above. The fund also had an exposure of ~5% in Sukuks rated 'A' and above. The unit holding pattern of the fund is highly concentrated with top ten investors representing ~85% of the fund's assets which exposes the fund to redemption pressure. The performance benchmark of the fund is “Six months average deposits rate of three 'A' rated scheduled Islamic banks or Islamic windows of conventional banks.
Going forward, the fund will invest in accordance with its stated investment policy and market expectations. 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
JS Investments Limited is one of the oldest private sector Asset Management Company in Pakistan. The company was established in 1995 and is listed on the Pakistan Stock Exchange. The Company is part of the Jahangir Siddiqui (JS) Group. JS Bank Limited holds ~85% shareholding in the Company. JS Group has strong presence in the financial sector with entities operating in banking, insurance, brokerage, and asset management sectors. The group has recently ventured into energy infrastructure and OMC segments. JS Investments possesses licenses for Asset Management Services, Investment Advisory, Private Equity and Venture Capital services. The Company has recently acquired REIT management license as well.

The Company’s board of directors comprises eight members including the Chief Executive Officer. The board is dominated by representatives of JS Bank Limited and Jahangir Siddiqui & Company Limited. The board has two independent directors while all the other directors are non-executive directors. The board members possess strong profile and skills suited to the financial services industry. Assets under management of the Company (CIS & VPS) stood at ~PKR 23,703mln at end Dec’20 and are spread across thirteen open-end mutual funds and two voluntary pension schemes. Investment platforms are provided to investors for both conventional and Islamic markets.

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.