PACRA Maintains Stability Rating of NAFA Mutual Funds

December 05, 2018 (MLN): PACRA maintains stability rating of NAFA Financial Sector Income Fund at ‘A+(f)’ for Long Term, with a ‘stable’ outlook forecast

The rating reflects the fund's good credit quality, modest liquidity profile and its mandate of maintaining minimum exposure of 70% at all times in the financial sector.

Going forward, the fund plans to keep its allocation to debt instruments, while the remaining assets will be invested in banks with rating 'A-' and above. Material changes in the fund's asset allocation strategy, which could negatively impact the fund's credit quality and exposure to interest rate risk, remains critical for the rating.

PACRA Maintains Stability Rating of NAFA Government Securities Liquid Fund at ‘AAA(f)’ for Long Term, with a ‘stable’ outlook forecast

The rating reflects the strong credit quality of the fund. This emanates from maintaining a high exposure to government securities ~41%.

Going forward, the rating remains dependent on maintaining at least 70% allocation towards AAA exposure with portfolio duration not exceeding 45 days. Meanwhile, the remaining assets of the fund must be placed with scheduled banks having very strong credit quality.

PACRA Maintains Stability Rating of NAFA Saving Plus Fund at ‘AA-(f)’ for Long Term, with a ‘stable’ outlook forecast

The rating reflects the fund's good credit quality, sound liquidity profile. The fund's low risk emanates from its investment policy of maintaining a sizeable proportion of placements with commercial banks predominantly rated in 'AA-' and 'AA+' category.

Going forward, the fund intends to maintain its investments in Government securities, MTS with rest of the assets invested in cash and placements with well-rated banks. Material changes in the fund's asset allocation strategy, which could negatively impact the fund's credit quality and exposure to interest rate risk, remains critical for the rating.

PACRA Maintains Stability Rating of NAFA Income Opportunity Fund at ‘A(f)’ for Long Term, with a ‘stable’ outlook forecast
The rating reflects the fund's mandate to build a sizeable exposure to debt investments though of good quality. As at end-Jun18, the total exposure stands at ~28% from financial and corporate sectors TFCs.

Going forward, the fund intends to increase its allocation to government-backed securities. The remaining assets will be invested in debt instruments and bank placements with a minimum rating of 'A-' and above rated banks. Material changes in the fund's asset allocation strategy, which could negatively impact the fund's credit quality and exposure to interest rate risk, remains critical for the rating.

PACRA Maintains Stability Rating of NAFA Riba Free Saving Fund at ‘A(f) for Long Term, with a ‘stable’ outlook forecast

The rating reflects a strong liquidity profile of the fund emanating from the maximum exposure of fund as cash balances.
Going forward the fund intends to enhance the share of GoP Ijarah Sukuks and Islamic commercial papers in the portfolio while keeping rest of the assets as daily cash balances and placements with 'A-' and above-rated banks. Material changes in the fund's asset allocation strategy, which could negatively impact the fund's credit quality and exposure to interest rate risk, remains critical for the rating.
 

PACRA Maintains Stability Rating of NAFA Active Allocation Riba Free Savings Fund at ‘A-(f)’ for Long Term, with a ‘stable’ outlook forecast

The rating reflects the strong credit quality of the fund. Currently, 'NAFA Islamic Active Allocation Plan I', 'NAFA Islamic Active Allocation Plan II', 'NAFA Islamic Active Allocation Plan III', ‘NAFA Islamic Active Allocation Plan IV’, ‘NAFA Islamic Active Allocation Plan V’, ‘NAFA Islamic Active Allocation Plan Vl’, ‘NAFA Islamic Active Allocation Plan Vll’ and ‘NAFA Islamic Active Allocation Plan VIll’ have invested their fixed income portions in this fund.

Going forward the fund intends to maintain ~5 % of its exposure in GoP Ijarah Sukuks while ~50% would be kept with banks rated 'A-'. Remaining exposure would be in banks with 'AA-' & A+. Material changes in the fund's asset allocation strategy, which could negatively impact the fund's credit quality and exposure to interest rate risk, remains critical for the rating.

PACRA Maintains Stability Rating of NAFA Islamic Income Fund (Formerly: NAFA Islamic Aggressive Income Fund) at ‘A-(f) for Long Term, with a ‘stable’ outlook forecast

The rating reflects strong credit quality of the fund. Currently, fund's exposure with sukuk is ~17%, while ~79% of the fund's assets are exposed towards banking deposits with banks rated 'A-' and above.

Going forward, the fund intends to reduce its allocation towards bank deposits. The remaining asset will be invested in Shariah-compliant government securities and good quality debt instruments. Material changes in the fund's asset allocation strategy, which could negatively impact the fund's credit quality and exposure to interest rate risk, remain critical for the rating.

PACRA Maintains Stability Rating of NAFA Income Fund at ‘A(f)’ for Long Term, with a ‘stable’ outlook forecast
The rating reflects average credit quality, moderate exposure against interest rate volatility, and diversified sectoral exposure in assets.

Going forward the fund intends to maintain its allocation to good quality debt instruments with the remaining assets invested in government securities and cash balance with a minimum rating of 'A' and above. Material changes in the fund's asset allocation strategy, which could negatively impact the fund's credit quality and exposure to interest rate risk, remains critical for the rating.

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