The Pakistan Credit Rating Agency Limited
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Ayesha Qasim

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PACRA Maintains Stability Rating of NAFA Income Opportunity Fund

Rating Type Stability Rating
(30-Jun-18 )
(12-Jul-17 )
Action Maintain Maintain
Long Term A(f) A(f)
Short Term - -
Outlook Stable Stable
Rating Watch - -

The investment objective of the fund is to earn a reasonable rate of return while ensuring capital preservation for its unit holders by investing in money market and debt securities.

The rating reflects the fund's mandate to build a sizeable exposure to debt investments though of good quality. As at end-Dec17, the total exposure stands at (12%) from financial and corporate sectors TFCs. Majority of the assets are deployed in cash balances and placements with good commercial banks (76%). Exposure of bank deposits is with 'A-' and above rated banks. The exposure with Government securities is merely around 2%, remaining assets portion is in margin trading system (1%) which due to its self-liquidating nature, possesses less risk over a short tenure%). The unit holding pattern of the fund is concentrated with top10 investors representing 43% of the fund's assets, (of which ~11% are owned investments) which exposes the fund to a low level of redemption pressure.
Going forward, the fund intends to increase its allocation to government securities (35%). The remaining assets will be invested in debt instruments and bank placements with a minimum rating of 'A' and above rated banks. Material changes in the fund's asset allocation strategy, which could negatively impact the fund's credit quality and exposure to interest rate risk, remain critical for the rating.

About the Entity
NBP Fund Management Limited (Formerly: NBP Fullerton Asset Management Limited), established in 2005, is licensed by Securities and Exchange Commission (SECP) to carry out asset management and investment advisory business. NBP is the largest shareholder of the AMC with a stake of ~54%, followed by Alexandra Fund Management Pte. Ltd ~36% stake. The CEO of NBP Fund, Dr. Amjad Waheed, also holds a stake of 10% in the company.

Company nine-member Board of Directors comprise the company’s CEO, three representatives of NBP, two representatives of FFMG and three independent directors. During the year Mr. Mudassir Husain Khan and Mr. Tariq Jamali joined the company’s board as a Non-Executive directors, both are the representatives of the bank. The company is currently managing a diversified fund slate of twenty funds in the categories of asset allocation, income, equity and money market.

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.