The Pakistan Credit Rating Agency Limited
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Madiha Sohail

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PACRA Maintains Stability Rating of 786 Smart Fund

Rating Type Stability Rating
(18-Oct-23 )
(14-Apr-23 )
Action Maintain Maintain
Long Term AA-(f) AA-(f)
Short Term - -
Outlook Stable Stable
Rating Watch - -

786 Smart Fund (or the "Fund") is an open-ended Shariah-compliant income category Fund that reflects the medium risk profile. The objective of the Fund is to provide competitive risk-adjusted returns to its investors by investing in a diversified portfolio of long, medium, and short-term Shariah-compliant debt instruments while taking into account liquidity considerations. The assigned rating reflects the Fund's moderate credit and interest rate risk profile emanating from its investment strategy. As of Jun'23, the Fund had allocated ~88.1% in Sukuks and TFCs, out of which ~21% is invested in GoP Ijarah Sukuk and 67.1% in Corporate Sukuk. The investment in Corporate Sukuks is majorly in AA and above rated. The duration stood at 2 days as of Jun'23; limiting the exposure to interest rate risk. At the end of Jun'23, the WAM stood at 595 days; exposing the Fund to high credit risk. Since the investment is majorly in long-term Sukuks including GoP Ijarah Sukuk (~21%), the credit risk is at a manageable level. The unit holding pattern of top 10 investors concentration of the Fund, at the end of Jun’23 was ~88.59%, keeping redemption pressure to a high level.
Going forward, 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
786 Investments Limited is a public listed company and was founded in 1990 with Asian Development Bank being its co-sponsor. The Company commenced business operations of venture capital financing in 1993. Later, in 2002, First Dawood Group in partnership with Asian Development Bank, converted the Company's business operations to asset management. The key shareholders are First Dawood Investment Bank (15%), Bank of Khyber (15%), B.R.R. Guardian Modaraba (~13%), and Miss Tara Uzra Dawood (~12%). The remaining shareholding of ~45% is held by other individuals and entities. 786IL has merged First Dawood Mutual Fund and 786 Rising Star Fund with and into 786 Smart Fund. The Company had AUM's of ~PKR 721mln at end of Jun'23.
786 Investments Limited has a seven-member board including the CEO, Ms. Tara Uzra Dawood. She holds a Doctorate in judicial science from Harvard Law School. She has around two decades of professional experience in mergers and acquisitions, corporate law and investment management. She is supported by an experienced core management team. The other board members comprise four independent directors including Mr. Ahmed Salman Munir, who is also also the Chairperson of the board. He has more than 30 years of progressive experience working with Fortune many companies both inside and outside Pakistan.

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.