PACRA assigns Initial Stability Rating to NBP Islamic Government Securities Plan – III

NBP Islamic Government Securities Fund is a medium-risk profile open-ended Fund. The objective of the Fund is to offer different allocation plans and to provide investors in each allocation plan with attractive returns, by investing primarily in Shariah-Compliant Government Securities. The duration of the Fund is perpetual; however, allocation plan(s) launched by the NBP Fund Management Limited under this Fund may be perpetual or may have fixed maturity. NBP Islamic Government Securities Plan I, II, III, IV and V come under the umbrella of this Fund. The plans will invest in authorized avenues to meet investment objectives.
Initially, NBP Islamic Government Securities Plan – III is launched on 19 Jan'24. The plan, in line with its investment objectives, is invested in the authorized investment avenues i.e. Islamic Government Securities, cash deposits in Islamic banks, or Islamic window of conventional banks excluding term deposit certificates.
The initial size of the plan was PKR 164mln at the end of Jan-24. The Plan had invested ~53.1% in AAA-rated GoP Ijara Sukuk, and 44.6% in AA- rated bank. The WAM of the Plan stood at 752 days at the end of Jan’24, exposing the Fund to high credit rate risk. However, since the investment is in GoP Ijara Sukuk, the credit risk is at a manageable level. The duration of the Plan stood at 66 days at the end of Jan’24, exposing the Fund to interest rate risk. The unit holding pattern of the top ten investor concentration of the plan was ~82%, exposing the Plan to high redemption pressure risk. However, the ability to meet redemption remained sound on the back of a strong liquid profile. Since the inception, the Fund remained compliant with the credit quality criteria of assigned rating. As the fund positions itself for expansion, various elements, including AUMs size, concentration and other risk factors, are undergoing a developmental phase. This signifies that these factors are in a state of evolution, coinciding with the fund's poised growth trajectory.
Going forward, the Fund will invest in accordance with its authorized investment policy and maintain its exposure in Shariah Compliant instruments, however the allocations need to be diversified appropriately. Risk may vary slightly from time to time considering the volatility of economic conditions. 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 of Directors includes three independent directors and the CEO. With overall assets under management of PKR ~287bln at end-Jan'24, the Company is currently managing a diversified fund slate of twenty five open-end mutual funds, four voluntary pension schemes and one Exchange Traded Fund.