The Pakistan Credit Rating Agency Limited
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Afnan Iqbal

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PACRA Maintains Asset Manager Rating of National Investment Trust Limited, Outlook "Positive"

Rating Type Asset Manager
(05-Nov-20 )
(05-Nov-19 )
Action Maintain Maintain
AM Rating AM2++ AM2++
Outlook Positive Stable
Rating Watch - -

National Investment Trust Limited ("NITL" or the "Company") reaps the benefit of being the first AMC in Pakistan and a robust financial profile. The rating incorporates the Company’s experienced management team, structured investment decision making process, strong control environment, an adequate fund slate and satisfactory governance framework. The Company has segregated its compliance, Risk Management and Internal Audit function in line with the best practices to strengthen its control environment. The Company managed to sustain its AUMs in absolute terms during FY20 but the overall market share declined due to industry wide growth in relative fixed income avenues while the interest in equity portfolios remained low, based on uncertain economic and political environment. Consequently, the equity portfolios reflected less quantum of intrinsic growth. Positive market sentiments post Jun'20 may prove to be beneficial for the Company. The Company's product slate is tilted towards equity category and holds ~37% share of Shariah compliant and conventional equity category. And at end-Jun’20 ~80% of AUMs are concentrated in equity funds, which exposes the fund to high market risk amid second wave of COVID-19 pandemic. The investor concentration at fund level remained high except for the NIUT. The Company has adequate retail customer base and the management is focusing on strengthening its digital platform for better retail penetration, distribution and customer services. The Company has launched an asset allocation fund and ETF during CY20 and further plans to diversify and deepen its investors base. The Company is also focusing to capture market share of non-traditional investment avenues and has recently entered into agreements with prominent entities to provide investment advisory services under SMA mandate to the tune of PKR 50bln (non-discretionary). The overall funds performance in FY20 remained satisfactory with the equity funds outperforming the industry averages and benchmark. The Company remained profitable in FY20 and posted highest profits in industry. The profits of the Company are mainly attributable to management fee and fair value gain on equity investments. NITL has one of the largest equity base at end Jun'20.
The Positive Outlook on rating captures the improving fund slate of the Company that would ultimately translate into AUMs growth. The rating is also dependent on the management’s ability to sustain the competitive position of the company in the challenging industry dynamics and superior fund performance in comparison to peers.

About the Entity
National Investment Trust Limited was established in 1962 as an unquoted public limited company and pioneer of domestic mutual fund industry. The Company’s Board of Directors currently comprises ten board members out of which nine are non-executive. Mr. Adnan Afridi, CEO/MD who joined in Feb'19 holds profound experience in the financial services and capital markets. Mr. Manzoor Ahmed is the COO and has a successful track record of managing the operations and investment portfolio of the Company. They are supported by a team of qualified and experienced professionals.

The Company is currently one of the largest asset management company in Pakistan with a portfolio of ten open-end funds (including two non-public funds namely, NIT-SEF and NIT-EMOF) and two voluntary pension schemes. The assets under management of the Company stood at ~PKR 69bln (excluding SEF & EMOF) and ~PKR 76bln (including SEF & EMOF) at end-Jun'20. The Company launched an exchange traded fund and an asset allocation fund during CY20.

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.