Pakistan Credit Rating Agency Revises Stability Rating of Pakistan Income Enhancement Fund

Lahore, June 14, 2012 (PPI-OT): The Pakistan Credit Rating Agency (PACRA) has revised the stability rating of Pakistan Income Enhancement Fund (PIEF), an open-end aggressive income fund to ‘A+(f)’ (Single A Plus ; fund rating) [Previous rating:- ‘AA-(f)’]. The fund’s rating denotes a strong capacity to manage relative stability in returns and low exposure to risks.

The fund primarily invests in investment grade money market instruments and debt securities with the objective of providing high regular income to its unit holders. The fund’s TFC portfolio constitutes around 31% of total assets at end-Mar12.

There has been deterioration in the asset quality of TFC portfolio, with non-performing assets comprising 4% of net assets at end-Mar12. However, the fund’s asset quality still remains susceptible to downward risk owing to certain exposure against stressed investments. In addition the portfolio with duration of over 2 years remains susceptible to interest rate risk.

Apart from this the fund carries good credit quality, diversified sectoral concentration and adequate liquidity profile emanating from sizable investment in GoP securities comprising ~57% [T-bills: 41%, GoP Bonds: 16%] of net assets at end-Mar12. Nevertheless, the unit holding pattern is fairly dispersed with top10 investors holding more than 30% of fund’s units.

Going forward, the fund plans to invest 60% of its total assets in risk-free securities, with a portfolio duration of 1.5 years. The remaining assets will largely comprise TFCs (25%), term deposits (10%) and cash balances (5%).

The main risk factors affecting the stability of returns emanates from any further deterioration in the credit quality of asset profile and volatility in prices of TFCs amidst largely illiquid market for this segment.

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

Leave a Reply