The Pakistan Credit Rating Agency Limited
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Madiha Sohail

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PACRA Maintains Asset Manager Rating of 786 Investments Limited

Rating Type Asset Manager
(27-Dec-19 )
(28-Jun-19 )
Action Maintain Maintain
AM Rating AM3 AM3
Outlook Stable Stable
Rating Watch - -

The rating reflects the Company’s modest positioning in the competitive asset management industry. The Company has a strong governance framework in place. The management is working on further improving the profitability through consolidation of fund slate and growth in niche Islamic Market. In this regard, the Company has merged First Dawood Mutual Fund and 786 Rising Star Fund with and into 786 Smart Fund, which falls under Shariah compliant Income category. The effective date of merger is December 20, 2019. The fund performance remained strong with 786 Smart Fund outperforming the peers in the category. The Company has limited fund size. Losses in previous periods eroded its equity, although it meets the minimum regulatory requirement. Equity is expected to build up through internal generation. Strong sponsor commitment is considered positive for the rating. The Company has an experienced management team and adequate organizational structure.
The rating is dependent on materialization of strategy to enhance AUM's and market position of the Company. Meanwhile, maintaining strong fund performance and diversifying fund slate is important. Upholding high governance standards and strengthening of risk management is crucial for the rating.

About the Entity
786 Investments Limited is a public listed company and was founded in 1990 with Asian Development Bank being its co-sponsor. The Company commenced business operations of venture capital financing in 1993. Later, in 2002, First Dawood Group in partnership with Asian Development Bank, converted the Company's business operations to asset management. The key shareholders are First Dawood Investment Bank (15%), Bank of Khyber (15%), B.R.R. Guardian Modaraba (~13%), and Miss Tara Uzra Dawood (~12%). The remaining shareholding of ~45% is held by other individuals and entities. The Company had AUM's of ~ PKR 597 mln at end Sep-19 (Dec'18: ~PKR 694 mln).
786 Investments has a seven member board including the CEO, Ms. Tara Uzra Dawood. She holds a Doctorate in judicial science from Harvard Law School. She is on the board of directors of MUFAP and has around two decades of professional experience in mergers and acquisitions, corporate law and investment management. She is supported by an experienced core management team. The other board members comprise four independent directors including Mrs. Shafqat Sultana, who is also also the Chairperson of the board. She is a professional banker and possesses around four decades of experience in financial sector.

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.