FAML's rating reaffirmed with stable outlook

JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed the Management Quality rating of Faysal Asset Management Limited (FAML) at 'AM2-' (AM Two Minus) Outlook on the rating is 'Stable'. In the past one and a half years, the AMC saw growth in funds carrying exposure in low-risk asset classes, analogous to the trend in the mutual fund industry, at large.
Faysal Savings and Growth Fund (FSGF), which largely comprises cash and cash equivalents, represented around three-fourths of total assets of rupees 6.5 billion managed by the AMC at end-Match 2011. Some degree of variance has been noted in terms of the management's ability to manage different asset classes. While in FY10, returns of funds carrying equity exposure compared favourably to peers, subsequent to FY10; the return of balanced fund under management has been on the lower side in relation to peers and benchmark.
Return of income funds under management has remained consistently positive, as the same comprise high proportion of cash and cash equivalents with highly rated institutions and exposure to high risk instruments remains low. Given the launch of three funds in 2010, number of funds under management has doubled. Also, in latter half of CY10, the AMC signed on clients in the domain of investment advisory. In view of the launch of new funds and foray into the investment advisory space, ability of the management to deal with diverse investment objectives and client servicing capabilities will be tested further. The company plans to appoint an independent business head for investment advisory. Documentation of policies in this respect also needs to be finalised.
Faysal Bank Limited and holding company of its parent bank continue to hold majority stake in the AMC at 80 percent. Remaining stake of 20 percent, previously with AKD Securities Limited (ASL), is now held by Ali Ansari, former CEO of ASL. Board of the AMC comprises experienced professionals and maintains close oversight. Investment management function has been strengthened in 2010, however, few positions are currently vacant on the management side and these vacancies are targeted to be filled in the near future.
The mutual fund industry currently enjoys strong institutional investor base in view of the tax advantage. Industry participants have yet to establish a strong foothold in the retail market. Going forward, differentiation in product offering and superior customer services may enable companies to distinctly position themselves.-PR