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
(18-Apr-19 )
(04-Dec-18 )
Action Maintain Maintain
Long Term A(f) A(f)
Short Term - -
Outlook Stable Stable
Rating Watch - -

The fund's objective is to seek maximum possible preservation of capital and a reasonable rate of return via investing primarily in money market & debt securities having a good credit rating and liquidity.

The rating reflects the fund's mandate to build a sizeable exposure to debt investments of good quality. As at end-Dec18, the total exposure stands at ~33% from financial and corporate sectors TFCs. Majority of the assets are deployed in cash balances and placements with good commercial banks ~46%. Exposure of bank deposits is with 'A' and above rated banks. The exposure with Government securities is merely ~3%, remaining assets portion is in margin trading system ~3% 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 ~39% of the fund's assets, (of which ~17% are owned investments) which exposes the fund to a very low level of redemption pressure.
Going forward, the fund intends to maintain its current portfolio mix. Material changes in the fund's asset allocation strategy, which could negatively impact the fund's credit quality and exposure to interest rate risk, remains critical for the rating.

About the Entity
NBP Fund Management Limited, 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%. During the year, Baltoro Growth Fund acquired the entire (36%) stake of Alexandra Fund Management Pte. Ltd. in the company. Baltoro Capital is a Pakistan focused private equity firm. Baltoro has made three investments in the pharmaceutical, renewable energy and financial services sectors. It is actively deploying its funds in businesses positioned to achieve extraordinary growth. The CEO of NBP Fund Management Limited, Dr. Amjad Waheed, also holds a 10% stake in the company.

The company’s nine-member Board of Directors include three independent directors and the CEO. During the year, there has been some new induction in the Board of Directors. The company is currently managing a diversified fund slate of twenty-six mutual funds and two pension funds.

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.