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The Pakistan Credit Rating Agency Limited

Date
12-Dec-2017
Analysts
Rai Umar Zafar
rai.umar@pacra.com




+92-42-35869504
www.pacra.com
Applicable Criteria

  • Methodology | Fund Stability Rating (Jun 17)

Related Research

  • Sector Study | Asset Management (Apr 17)
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PACRA Upgrades Stability Rating of NIT Government Bond Fund
 Rating Type Stability Rating
Current
(12-Dec-2017)
Previous
(12-Jul-2017)
 Action Upgrade Maintain
 Long Term AA(f) AA-(f)
 Short Term - -
 Outlook Stable Stable
 Rating Watch - -

The fund's mandate is to generate reasonable return with minimal risk by primarily investing in bonds and short-term debt securities issued by Government of Pakistan (GoP).

The rating reflects the change in the investment strategy to reduce the duration of the fund. At Sep-17, the fund's portfolio comprises of Government Securities (~73%) and the remaining assets is exposed in Bank Balance (~27%) across AA+ rated Banks. On monthly average basis, the fund duration stood at 84 days while average exposure to Government Securities (~77%) which reflected low interest rate volatility and strong credit profile. The unit holding pattern of the fund is highly concentrated towards top 10 investors representing 76% of the fund's assets, which exposes fund to redemption pressure. The comfort can be drawn from the liquid nature of investments.

Going forward, the rating remains dependent on maintaining at least 70% allocation towards government securities with portfolio duration not exceeding 90 days. PACRA would monitor compliance against agreed parameters on monthly average basis.
About the Entity
NIT is the first asset management company of Pakistan, formed in 1962. The Government of Pakistan (GoP) directly and indirectly through government owned entities is major shareholder (41.65%) in the company. Other shareholders comprise prominent businessmen and commercial banks having shareholding of 8.33% each. These shareholders are represented by a board of ten directors. The company is currently the leading asset management company in Pakistan with a portfolio of eight open end funds & two pension funds. The open end funds have an AUM base of ~PKR 102bln at end-Sep17. The company operates the country's largest equity fund - NI(U)T - (fund size of ~PKR 74.5bln at end Sep-17.)

During the year, The Managing Director, Mr. Shahid Ghaffar left office and has been succeeded by NITL's COO, Mr. Manzoor Ahmed. Mr. Manzoor is a seasoned professional holding profound experience in the domestic mutual fund industry. He is supported by a team of qualified and experienced 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.