The Pakistan Credit Rating Agency Limited
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Muhammad Azmat Shaheen

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PACRA Upgrades Asset Manager Rating of ABL Asset Management Company Limited

Rating Type Asset Manager
(26-Oct-22 )
(26-Oct-21 )
Action Upgrade Initial
AM Rating AM1 AM2++
Outlook Stable Positive
Rating Watch - -

The rating upgrade of ABL Asset Management Company Limited ("ABL AMC" or the "Company") incorporates the Company's i) elevating market positioning, ii) improved fund's performance, iii) digital penetration and iv) strong equity profile. The association of the Company with a well-established bank, which is one of the dominant players in the banking sector, bodes well for the ratings. Since Jun'21, the overall industry has shown growth by ~16%, while the AMC has slightly leaped ahead with the industry and has shown a growth of ~21%. Since 2017, the AMC has managed significantly to increase its AUMs base by almost 2.2x, while market share has increased to ~8% at the end Aug'22. Considering the high-interest rate environment, the AUMs base of the AMC is tilted more towards the money market and income category, constituting ~80% of total AUMs, in line with the industry. The investor's concentration at the AMC level is comfortably low at 43%. The Fund slate of the AMC is well diversified however, the AMC has plans to launch further funds in near future. During FY22, the majority of the funds featured in the first and second quartiles. The Company has an adequate retail customer base, while the management is aggressively focusing on strengthening its digital platforms for better retail penetration, distribution network, and customer services along with establishing its dedicated Saving Centers. Continued focus on retail expansion and enhanced delivery channels is also taken into consideration. The rating of the Company also takes into account an experienced management team, sound governance framework and adequate investment decision making process. The ABL AMC has a well-established risk management framework and compliance protocols. Materialization of digital initiatives in terms of enhanced retail growth and market share is critical. In order to strengthen its product slate, the Company is also operating under advisory services with a healthy SMA portfolio.
On financial profile side, during 1HCY22, the Company suffered unrealized losses from investments in Equity funds, which is in line with current market trend. Despite unrealized losses, the Company enjoys sound liquidity and has sufficient equity base of PKR 2.9bln as of Jun'22, which is well above the peers universe.
The rating is dependent on the management's ability to effectively execute business development plans and leveraging its digital initiatives to strengthen its operations and outreach. Sustaining consistency in terms of fund's performance to remain in top quartile, and regaining of profitability would remain imperative. The retention of key management personnel, sound corporate governance and further strengthening investment process remains key rating factors.

About the Entity
Incorporated in 2007, ABL AMC is a wholly owned subsidiary of Allied Bank Limited (ABL). ABL operates with 1,400 plus branches including 117 Islamic banking branches, 8 Digital/ Self Service branches & 2 overseas branches. ABL AMC possesses licenses for asset management, pension management and investment advisory services. As the leading private sector asset management and investment advisory Company in Pakistan, offerings include a comprehensive range of both Conventional and Shariah Compliant investment solutions across all major asset classes.

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.