Analyst
Mohsin Naseer
mohsin.naseer@pacra.com
+92-42-35869504
www.pacra.com
Applicable Criteria
Related Research
PACRA Maintains Stability Rating of Pakistan Cash Management Fund
Rating Type | Stability Rating | |
Current (12-Jul-17 ) |
Previous (09-Dec-16 ) |
|
Action | Maintain | Maintain |
Long Term | AAA(f) | AAA(f) |
Short Term | - | - |
Outlook | Stable | Stable |
Rating Watch | - | - |
The fund's mandate is to generate optimal returns by investing primarily in shorter duration money market instruments.
The rating reflects the strength of the fund's credit and interest risk profile. The fund's very strong credit quality and sound liquidity profile emanates primarily from its mandate to invest in government securities; mainly Treasury Bills. At the same time, the fund adheres to very conservative duration limit, ensuring low exposure to interest rate risk. At end-May17, the fund is primarily invested in T-bills (95.25%), while the remaining assets are held as cash in scheduled banks with very strong credit quality – AAA. Average duration of the fund and exposure in government securities remained in line with assigned parameters. The unit holding pattern of the fund has high concentration with top10 investors representing 85% of the net assets which exposes the fund to redemption pressure.
Going forward, the rating remains dependent on maintaining at least 70% allocation towards government securities or AAA rated banks with portfolio duration not exceeding 45 days. Meanwhile, the remaining assets of the fund must be placed with scheduled banks having very strong credit quality. PACRA would monitor compliance against agreed parameters on monthly average basis.
About
the Entity
MCBAH is a subsidiary of MCB Bank Limited (MCB). MCB holds majority stake (51%) in the company, followed by Arif Habib Corporation Limited (30%). The company is managing fourteen open end mutual funds along with two pension schemes with AUMs of ~ PKR 47bln at end-Mar17. MCBAH also manages an SMA portfolio of ~ PKR 24bln. Sizeable chunk of this portfolio is related to an associated company. MCB, the fourth largest bank in Pakistan in terms of asset size and branch network, has a very strong financial position, evidenced by a long-term entity rating of AAA by PACRA. Arif Habib Corporation is the holding company for Arif Habib Group with interests in the financial and industrial sectors.
MCBAH’s eight members BoD, three representatives from MCB including CEO, two representatives from AHG and three are independent. Mian Muhammad Mansha - Chairman MCB - serves as the Chairman on the board. Mr. Nasim Beg - a representative of AHG - acts as the Vice Chairman. Mr. Saqib Saleem, former Chief Operating Officer and Company Secretary, is leading the AMC as Chief Executive Officer.