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The Pakistan Credit Rating Agency Limited
Press Release

Date
16-Oct-20

Analyst
Afnan Iqbal
afnan.iqbal_old@pacra.com_old
+92-42-35869504
www.pacra.com

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This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to PACRA

PACRA Upgrades Stability Rating of NBP Riba Free Saving Fund

Rating Type Stability Rating
Current
(16-Oct-20 )
Previous
(17-Apr-20 )
Action Upgrade Maintain
Long Term A+(f) A(f)
Short Term - -
Outlook Stable Stable
Rating Watch - -

The rating upgrade takes into account the change in the funds investment policy. Removal of investments in long-term debt securities and spread transactions and modification of minimum ratings conform with the ‘Low’ risk profile. The fund would primarily comprise of Shariah Compliant diversified portfolio of bank deposits, money market and government debt instruments/securities. The placement of funds in Riba free deposits with Islamic banks/Islamic window of conventional banks, other than TDR, will be in higher of the 'A' spectrum. The credit risk is expected to remain on the lower side. At the same time, the fund policy dictates higher allocation to liquid avenues. This enhances the liquidity profile of the fund. At end Jun'20, the fund had placed ~50% of funds with banks and DFI's mostly rated 'A-' and above. The fund also had an exposure of ~20% in GoP Ijara Sukuk and remaining funds were invested in corporate Sukuks and commercial papers. The unit holding pattern of the fund is moderately concentrated, top ten investors represent ~31% of the funds assets which reduces the redemption pressure.
Going forward, the fund intends to increase asset allocation with banks in low credit risk avenues (mostly in AA category and occasionally higher spectrum of A). 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
NBP Fund Management Limited (or the "Company"), established in 2005, is licensed by Securities and Exchange Commission (SECP) to carry out asset management and investment advisory business. National Bank of Pakistan is the largest shareholder of the company with a stake of ~54%. In 2019, Baltoro Growth Fund has acquired the entire 36% stake of Alexandra Fund Management Private Limited in the Company. Baltoro Capital is a Pakistan focused private equity firm. Baltoro Capital has made investments in the pharmaceutical, renewable energy and financial services sectors in Pakistan. It is actively deploying its funds in businesses positioned to achieve extraordinary growth. The CEO of NBP Fund Management Limited, Dr. Amjad Waheed, CFA and family also holds a 10% stake in the company.

The Company’s nine-member board comprises the CEO, three representatives of National Bank of Pakistan, two representatives of Baltoro Growth Fund and three independent directors. With overall assets under management of PKR 126,853mln at end Jun'20, the Company is currently managing a diversified fund slate of twenty seven open-end funds and two voluntary pension schemes under twelve different categories.

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.