Pakistan Credit Rating Agency upgrades stability rating of National Fullerton Asset Management income fund

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

The fund primarily invests in Shariah compliant money market and debt securities and aims to provide a reasonable rate of return and capital preservation to its unit holders. The rating reflects fund’s adequate credit quality and relatively weak liquidity profile.

The rating also incorporates funds moderate exposure to interest rate risk. Currently, a significant majority of fund’s assets are invested in corporate Sukuk bonds (~47% end-Mar12), while remaining portion largely comprises GoP Ijara Sukuk (24%) and daily cash balances with scheduled banks.

The fund has a considerable proportion of non-performing Sukuks, though a sizeable provisioning has already been made. However, recent restructuring developments coupled with regularization of payments from some of the large exposures would bode well for the fund.

The unit holding pattern is significantly concentrated with top ten investors holding around 90% of fund’s units. However, comfort can be drawn from large investments by the sponsors in this fund.

Going forward, the fund anticipates slight reduction in its exposure to Sukuks and increasing investments in government securities and term-deposits with Shariah Compliant banks. The main risk factor affecting the stability of returns emanate from holding of unprovided non-performing Sukuks and volatility in prices of Sukuks 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