The Pakistan Credit Rating Agency Limited
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Wajeeha Asghar

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PACRA Maintains Stability Rating of Pak Oman Advantage Islamic Income Fund

Rating Type Stability Rating
(17-Aug-23 )
(17-Feb-23 )
Action Maintain Maintain
Long Term A+(f) A+(f)
Short Term - -
Outlook Stable Stable
Rating Watch Yes -

Pak Oman Advantage Islamic Income (or the "Fund") is a moderate risk profile Fund. The assigned rating reflects the Funds' moderate credit risk profile emanating from the Fund's investment policy to invest in avenues with sound liquidity. The objective of the Fund is to provide investors with competitive current income and long term capital growth primarily by investing in a diversified portfolio of shariah compliant securities available for investment outside Pakistan subject to applicable laws. The AUMs of the Fund stood at PKR 227mln at the end Jun’23 (Dec’22: PKR 436mln). The Fund had allocated ~73.5% in banks majority ~61.2% in single A- rated bank and ~11.7 in double AA rated bank. Whereas ~15% in corporate sukuks and ~11.5% in GoP Ijarah Sukuks at the end Jun’23. The duration of the Fund stood at 168 days at end Jun’23, exposing high interest rate risk whereas the WAM of the Fund stood at 420 days at the end Jun’23, exposing high credit risk. However, credit risk is high due to investment in Govt securities. The unit holding pattern of the Fund is highly concentrated where ~96.7% is represented by top 10 investors. However, ~14.37% is of related party holding, keeping redemption pressure at moderate level. The Fund facing downward pressure due to non compliance with the assigned rating criteria throughout the period.
Going forward, the Fund should intend to diversify its investment maximum 25% in single A rated avenues and cannot invest below A over the given short horizon. Any non compliance if reported, would result in revision of rating action. Any 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
Pak Oman Asset Management Company Limited was incorporated on July 28, 2006 as a public unlisted company. It is licensed by the Securities and Exchange Commission of Pakistan to carry out asset management and investment advisory services under the Non-Banking Finance Companies Regulations. The company is a majority owned subsidiary of Pak Oman Investment Company Limited (98%). The remaining shareholders include Oman International Development Company (0.84%) and Bank Muscat (0.43%). The company’s Board of Directors comprises six members including the managing director of Pak Oman Investment Company, Mr. Bahauddin Khan. The board’s chairman H.H Juland Jaifer Salim Al-Said has over 15 years of experience at the Oman Investment Authority (OIA) (Previously known as State General Reserve Fund). The company’s diverse product slate includes eight open end funds as at Jun'23 belonging to all major categories. The AUMs of the Company stood at~6.3bln in the Jun'23.

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.