Pakistan Credit Rating Agency Upgrades Stability Rating Of IGI Aggressive Income Fund

Lahore, June 28, 2012 (PPI-OT): The Pakistan Credit Rating Agency (PACRA) has upgraded the stability rating of IGI Aggressive Income Fund (IGI-AIF) to “BBB+(f)” (Triple B Plus ; fund rating) [Previous Rating: “BBB(f)”], an open-end aggressive income fund. The fund’s rating denotes an adequate capacity to manage relative stability in returns and high exposure to risks.

The primary investment objective of the fund is to provide a stable stream of income, though having a high level of risk by primarily investing in fixed income securities and offering prospects of income and capital growth.

The rating reflects fund’s improving credit quality and relatively modest liquidity profile. Currently, a significant majority of fund’s assets are invested in Government securities (Primarily T-Bills ~30%), while the remaining portfolio comprises corporate debt instruments (TFCs: 26%, Sukuk: 5%) and placement with DFIs and banks.

The fund’s TFC portfolio experienced significant deterioration on account of non-performing instruments. However, the fund has provided for most of the infected assets, diluting the exposure to ~12% of net assets. Moreover, the fund has significantly diluted its sectoral concentration in line with its latest diversification strategy. Nevertheless, the unit holding pattern is highly concentrated, with top five investors holding more than 90% of fund’s units. However, comfort can be drawn from significant sponsor’s holdings in the fund.

Going forward, the fund aims to limit TFCs exposure to 25% of net assets, with the remaining portfolio in Govt. Securities and cash balances. The main risk factor affecting the stability of returns emanates from the volatility in prices of TFCs amidst largely illiquid market for this segment and holding of unprovided non-performing TFCs in fund’s book.

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

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