Final PR
The Pakistan Credit Rating Agency Limited

Rai Umar Zafar

Mohsin Naseer

Applicable Criteria

  • Methodology | Fund Stability Rating (Jun 17) [View]

Related Research

  • Sector Study | Mutual Funds (Oct 16) [View]
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PACRA Maintains Stability Rating of NAFA Government Securities Savings Fund
 Rating Type Stability Rating
 Action. Maintain Maintain
 Long Term AA-(f) AA-(f)
 Short Term - -
 Outlook Stable Stable
 Rating Watch - -

The objective of the fund is to provide competitive return from a low credit risk portfolio by investing primarily in Government Securities.

The rating reflects the fund's strong credit profile emanating from its investment policy to invest at least 70% in Government Securities (PIBs, T-bills) and remaining investments will be in bank deposits and money market placements etc. At end-May 17, 73.3% of the fund’s assets were invested in Government securities, all T-Bills. The remaining assets of the fund were invested with banks as banking deposits with 'AAA' rating (0.6%), 'AA+' rating (1.4%) and below ‘AA+’/above ‘A-’ (24.8%). On monthly average basis, the duration of the fund was 29 days in May-17. The unit holding pattern of the fund was highly concentrated towards top 10 investors representing 67% of the portfolio, this exposes fund towards redemption pressure.

Going forward, the rating remains dependent on maintaining at least 70% allocation towards government securities with portfolio duration not exceeding 2 years. PACRA would monitor compliance against agreed parameters on monthly average basis.
About the Entity
NAFA was incorporated in August 2005. National Bank of Pakistan (NBP) is the major shareholder of NAFA with 54% stake, followed by Alexandra Fund Management Pte. Ltd - 36% stake. With an asset base of PKR ~2trl at end-Dec16, NBP is the one of the country's largest commercial bank. The CEO of NAFA holds a stake of 10% in the company. Presently, the company is managing a diversified portfolio of 22 open-end funds (12 Shariah compliant & 10 conventional), two pension schemes and several discretionary portfolios with AUM of PKR 109bln at end May-17.

NAFA’s nine-member BoD comprises the company’s CEO, three representatives of NBP, two representatives of Alexandra Fund and three independent directors. During the year Mr. Nausherwan Adil – Senior Executive Vice President & Group Chief Operations of NBP, is the chairman of the board. The founding CEO, Dr. Amjad Waheed, CFA, holds a Doctorate in Business Administration; he has extensive experience in domestic and international capital markets. He is supported by an experienced and qualified team of professionals.
The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.