The Pakistan Credit Rating Agency Limited
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Madiha Sohail

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PACRA Maintains Stability Rating of NBP Financial Sector Income Fund

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

The rating reflects moderate strength of the fund's credit and interest rate risk profile. The investment policy holds that the minimum requirements of the fund entails that at least 70% must be invested in Financial Sector Securities or Deposits. At the end of June'21, the bank deposits consisted of 71.04% where there was a predominant investment in rankings of AAA and AA+. The rest of the Fund was divided adequately between TFC'S/Sukuks and and NBFI's, consisting of 9.4% and 7.38% respectively. Spread transactions are 4.6% of the total asset allocation. Considerable holding in cash and bank balances enforce the liquidity profile of the fund. The WAM has been parameterized by 4 years and as of June'21, NBPFSIF withholds its WAM well within the prescribed limit by its investment policy at 157 days. Therefore, the liquidity risk of the fund appears to be mitigated successfully. Furthermore, the duration of the fund has been parameterized by a limit of 1 year and as of June'21, has done well to keep the duration to a total of 9 days. The top 10 investors possess a concentration of 65% in the fund's total assets. Therefore, it could be ascertained that the fund holds a high unit holding pattern.
Going forward, the fund may increase its asset allocation towards higher rated banks and corporate Sukuks, depending on market situation. 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 168,016mln at end-Jun'21, 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.