Pakistan Credit Rating Agency Limited Assigns Stability Rating to Dawood Income Fund

Lahore: The Pakistan Credit Rating Agency (PACRA) has assigned a stability rating of ‘A-(f)’ (Single A Minus – fund rating) to Dawood Income Fund (DIF) [Formerly; Dawood Money Market Fund], an open-end income fund. The fund’s rating denotes a strong capacity to manage relative stability in returns and low exposure to risks.

The primary investment objective of the fund is to provide a stable stream of income primarily by investing in fixed income securities, while offering prospects of income and capital growth. The rating reflects adequate credit quality of fund’s assets, mainly consisting of Government securities, TFCs, and TDRs. The liquidity profile of the fund is good due to sizable assets in the form of Government securities (~63% – Jul11). However, the exposure against non-performing debt instruments is considerably high (~13% of net assets).

This may lead to downward pressure on return and relative stability, particularly if restructuring efforts for the non-performing instruments do not materialize in a timely manner. Nevertheless, the fund has significantly diluted its sectoral concentration in line with its latest diversification strategy.

Moreover, the unit holding pattern is highly concentrated, with top five investors holding more than 90% of fund’s units. However, comfort can be drawn from significant sponsor’s holdings in the fund.

Going forward, the fund intends to keep more than ~50% of its assets in the form of GoP securities, while reducing its TFC portfolio to good credit quality instruments and rest of the portfolio in form of placement with banks. The main risk factor affecting the stability of returns emanates from the volatility in prices of TFCs 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