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

Lahore, February 16, 2016 (PPI-OT): The Pakistan Credit Rating Agency (PACRA) has upgraded the stability rating of NAFA Income Opportunity Fund (NIOF) 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 investment objective of the fund is to earn a reasonable rate of return while ensuring capital preservation for its unit holders by investing in money market and debt securities.

The rating reflects the fund’s mandate to build a sizeable exposure to debt investments though of good quality. As at end-Dec15, the total exposure stands at ~8% from financial and corporate sectors (TFC’s and Sukuk). The remaining assets are deployed in cash balances and placements with good commercial banks (78%) and merely (~3%) in government securities, mainly PIBs.

Meanwhile a moderate portion is deployed in margin trading system (3.7%), which due to its self liquidating nature, possesses less risk over a short tenure. The unit holding pattern of the fund is fairly concentrated with top10 investors representing 49% of the fund’s net assets as at Dec-15.

Going forward, the fund intends to increase its allocation to government securities (40%). The remaining assets will be invested in debt instruments and bank placements 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