The Pakistan Credit Rating Agency (Pacra) has upgraded stability rating of NAFA Riba Free Savings Fund (NRFSF), open-end Islamic Income fund to 'AA-(1)' (Double A Minus - fund rating). The Fund's rating denotes a very strong capacity to manage relative stability in returns and very low exposure to risk.
The objective of the Fund is to provide preservation of capital and earn a reasonable rate of return along with a higher degree of liquidity by investing in short-term products of Shariah compliant banks, money market instruments and Government securities. The rating reflects strong credit quality of the Fund's assets and strong liquidity profile. At the same time, the rating incorporates fund's moderate exposure to interest rate volatility.
Currently, a significant portion of Fund's assets comprises GoP Ijara Sukuks (-71 percent at end- May 11); the remaining portfolio is dominated by cash balances with Islamic banks carrying a minimum credit rating of 'A' & above. The unit holding pattern is fairly concentrated. The total fund size has increased to over 360 million at end-May 11.
Going forward, more than 50 percent of the portfolio will remain invested in GoP Ijara Sukuks and the remaining assets will be in the form of TDRs and cash balances with high rated Islamic banks. The main factor affecting the stability of fund could be significant change in proposed asset mix towards low rated avenues increasing the credit and liquidity risks.-PR
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