The Pakistan Credit Rating Agency Limited
12-Jul-17
Analyst
Mohsin Naseer
mohsin.naseer@pacra.com
+92-42-35869504
www.pacra.com
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Related Research
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PACRA Maintains Stability Rating of NAFA Active Allocation Riba Free Savings Fund
| Rating Type | Stability Rating | |
|
Current (12-Jul-17 ) |
Previous (09-Dec-16 ) |
|
| Action | Maintain | Maintain |
| Long Term | A-(f) | A-(f) |
| Short Term | - | - |
| Outlook | Stable | Stable |
| Rating Watch | - | - |
The objective of the fund is to earn a reasonable rate of return along with a high degree of liquidity by investing in short-term Shariah compliant products. This fund is exclusively built for investment of fixed income portions of "fund of funds" schemes of NAFA.
Currently, 'NAFA Islamic Active Allocation Plan I', 'NAFA Islamic Active Allocation Plan II', 'NAFA Islamic Active Allocation Plan III', ‘NAFA Islamic Active Allocation Plan IV’, ‘NAFA Islamic Active Allocation Plan V’ and ‘NAFA Islamic Active Allocation Plan VI’ have invested their fixed income portions in this fund. The unit holding pattern of these plans combined is highly concentrated with top 10 investors contributing 61% to the plans. Fund has 98% exposure in banking deposit with 'AAA' rated bank (31.4%), 'A+' rated bank (29.3%) and A- rated bank (37.1%) at end-May17.
Going forward the fund intends to maintain 20 % of its exposure in GoP bonds while 70% would be kept with banks rated 'A-' & above. Remaining exposure would be in sukuks with rating 'AA-' & above. Material changes in the fund's asset allocation strategy, which could negatively impact the fund's credit quality and exposure to interest rate risk, remains critical for the rating.
About
the Entity
NAFA was incorporated in August 2005. National Bank of Pakistan (NBP) is the major shareholder of NAFA with 54% stake, followed by Alexandra Fund Management Pte. Ltd - 36% stake. With an asset base of PKR ~2trl at end-Dec16, NBP is the one of the country's largest commercial bank. The CEO of NAFA holds a stake of 10% in the company. Presently, the company is managing a diversified portfolio of 22 open-end funds (12 Shariah compliant & 10 conventional), two pension schemes and several discretionary portfolios with AUM of PKR 109bln at end May-17.
NAFA’s nine-member BoD comprises the company’s CEO, three representatives of NBP, two representatives of Alexandra Fund and three independent directors. During the year Mr. Nausherwan Adil – Senior Executive Vice President & Group Chief Operations of NBP, is the chairman of the board. The founding CEO, Dr. Amjad Waheed, CFA, holds a Doctorate in Business Administration; he has extensive experience in domestic and international capital markets. He is supported by an experienced and qualified team of professionals.