Pakistan Credit Rating Agency Limited upgrades stability rating of NAFA Income Fund

Lahore, February 16, 2016 (PPI-OT): The Pakistan Credit Rating Agency (PACRA) has upgraded the stability rating of NAFA Income Fund (NIF), an open-end income fund, at ‘A'(f) (Single A ; fund rating) [previous rating ‘A-‘(f) (Single A minus ; fund rating)]. The fund’s rating denotes a strong capacity to manage relative stability in returns and low exposure to risks.

The rating reflects improvement in credit quality, low exposure against interest rate volatility, and diversified sectoral exposure in assets. The fund’s exposure towards banks as daily cash balances was (32%) and government securities (7%). The remainder of the assets were invested in margin trading system (31%) which, due to its self liquidating nature, possesses less risk over a short tenure.

The sizeable exposure of (~20%) with TFCs exposes fund towards credit risk. However, it seems to be in the manageable level due to good quality instruments (‘A+’ rated and above). The unit holding pattern of the fund is highly concentrated with top10 investors representing almost the entire fund which exposes the fund to redemption pressure.

Going forward the fund intends to maintain its allocation to good quality debt instruments (25%) with the remaining assets invested in government securities and cash balance with a minimum rating of ‘A’ and above. Material changes in the fund’s asset allocation strategy, which could negatively impact the fund’s credit quality and exposure to interest rate risk, remain critical for the rating.

For more information, contact:
Hammad Rashid
Analyst
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore – Pakistan
Tel: +9242 586 9504 -6
Fax: +9242 583 0425
Email: hammad.rashid@pacra.com
Web: www.pacra.com