Pakistan Credit Rating Agency Revises Stability Rating Of Pakistan Income Fund

Lahore, June 14, 2012 (PPI-OT): The Pakistan Credit Rating Agency (PACRA) has revised the stability rating of Pakistan Income Fund (PIF), an open-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’s objective is to deliver income by investing primarily in debt and fixed income securities without taking excessive risk. The rating reflects PIF’s sizable exposure (24%) to TFCs, creating distinction with funds having exposure to low risk avenues. Moreover, the non-performing assets formulate around 3% of the net assets at end Mar-12.

In addition, the portfolio with duration of over 2 years remains susceptible to interest rate risk. During FY12, PIF increased its exposure against longer maturity sovereign securities. Currently, the portfolio comprises T-Bills (~55%) and GoP Bonds (15%) at end-Mar12. The remaining portfolio is held in liquid form as TDRs and cash balances. Nevertheless, Unit holding pattern has low concentration, limiting the vulnerability of the fund against redemption risk.

Going forward, the fund will maintain 60% exposure to government securities, with portfolio duration of around 2.6 years. The remaining assets will largely comprise TFCs (25%), TDRs (10%) and cash balances (5%).

The main risk factor affecting the stability of returns emanate from the interest rate sensitivity of GoP securities and volatility in prices of TFCs amidst largely illiquid market for this segment; however, the fund maintains good quality TFCs, most of which are liquid.

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

Leave a Reply