Pakistan Credit Rating Agency revises stability Rating of Pak Oman Advantage Fund

Lahore, July 10, 2012 (PPI-OT): The Pakistan Credit Rating Agency (PACRA) has revised the fund stability rating of Pak Oman Advantage Fund (POAF) a closed-end income fund, to “A+(f)” (Single A Plus ; fund Rating) [Previous Rating:- "AA-(f)"]. The fund’s rating denotes a strong capacity to manage relative stability in returns and low exposure to risks.

The fund aims to invest in high quality debt instruments so as to generate superior risk-adjusted returns for its investors. The rating incorporates POAF’s sizable exposure to TFCs, creating a relative distinction with funds having high exposure to comparatively low risk risky avenues – mainly government securities.

However, the rating appreciates fund’s strong credit quality, diversified sectoral concentration in assets and low exposure to interest rate volatility. Currently, the portfolio largely comprises TFCs (62%) having ‘A+’ and above rating.

The remaining portfolio comprises cash balance (23%) with banks and government securities (14%) at end-May12. Meanwhile, the closed-end nature of the fund ensures a relatively stable fund profile. The fund has a limited life of 8 years after which it will be wound up (in May 2015). However, the option to convert it into an open-end fund remains available and may be exercised.

Going forward, the fund intends to increase its TFCs/Sukuk exposure to 80% of the net assets. The remaining portfolio will largely contain short term government securities (15%) and cash balances (5%) with good quality banks. Meanwhile, the portfolio duration will be less than 90 days. Main risk factors affecting the fund’s stability emanate from fluctuation in interest rates, volatility in prices of quoted TFCs and credit risk of counter-parties.

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