The Pakistan Credit Rating Agency Limited
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Afnan Iqbal

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PACRA Maintains Stability Rating of NBP Financial Sector Income Fund

Rating Type Stability Rating
(29-Mar-21 )
(16-Oct-20 )
Action Maintain Maintain
Long Term A+(f) A+(f)
Short Term - -
Outlook Stable Stable
Rating Watch - -

The assigned rating reflects the moderate strength of the fund's credit and interest rate risk profile. During the past few quarters, the fund has invested primarily in higher rated banks which has provided support to the fund's interest rate and credit risk profile. The fund aims to provide income enhancement and preservation of capital by investing in prime quality Financial Sector TFCs/Sukuks, Bank deposits and short-term money market instruments. The fund shall invest at least 70% of its assets in financial sector. The performance benchmark of the fund for the period of return is 6-Month KIBOR. At end Dec'20, ~72% of fund's assets were invested in banks rated 'A+' and 'AAA'. Remaining funds were allocated to T-Bills and Sukuks/TFCs. Considerable holding of cash and bank balances reinforce the liquidity profile. The unit holding pattern of the fund is moderately concentrated with top ten investors representing ~55% of the fund's assets, which exposes the fund to a moderate level of redemption pressure.
Going forward, the fund may allocate assets in banks and debt instruments of banks in accordance with its stated investment policy and market expectations. Material changes in the fund's asset allocation strategy, impacting its credit quality and/or exposure to interest rate risk, would affect the rating.

About the Entity
NBP Fund Management Limited (or the "Company"), 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%. In 2019, Baltoro Growth Fund has acquired the entire 36% stake of Alexandra Fund Management Private Limited in the Company. Baltoro Capital is a Pakistan focused private equity firm. Baltoro Capital has made investments in the pharmaceutical, renewable energy and financial services sectors in Pakistan. It is actively deploying its funds in businesses positioned to achieve extraordinary growth. The CEO of NBP Fund Management Limited, Dr. Amjad Waheed, CFA and family also holds a 10% stake in the company.

The Company’s nine-member Board of Directors includes three independent directors and the CEO. With overall assets under management of PKR 163,473mln at end-Dec'20, the Company is currently managing a diversified fund slate of twenty eight open-end mutual funds, two voluntary pension schemes and an Exchange Traded Fund.

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.