Pakistan Credit Rating Agency (Pacra) has upgraded the stability rating of Pakistan Income Enhancement Fund (PIEF) to "AA-(f)" (Double A Minus-fund rating) [Previous rating: 'A+ (f)' (Single A Plus - fund rating)], an open-end aggressive income fund. The fund's rating denotes a very strong capacity to manage relative stability in returns and possesses a very low exposure to risks.
The hind primarily invests in investment grade money market instruments and debt securities with the objective of providing high regular income to its unit holders. The rating reflects fund's good credit quality, diversified sectoral concentration and low sensitivity to interest rate movements.
The liquidity profile of the fund is good due to sizeable assets in the form of T-Bills and placements with banks. Despite its mandate of earning high return, the fund, to date, has remained conservative in building TFC portfolio, which constituted around one-third of total assets at end-November 10. There has been no occurrence of non-performance in fund's TFC portfolio. However, the unit holding pattern is fairly dispersed with top 10 investors holding more than 30 percent of fund's units.
Going forward the fund plans to invest 65 percent of its total assets in risk-free securities to manage the credit risk linked with uncertain economic conditions. However the intended low-risk asset profile may lead to some compromise on the fund: objective of providing high income. The main risk factor affecting the stability of returns emanates from volatility in prices of TFCs amidst largely illiquid market for this segment; however, most of the TFCs are of good credit quality and are actively traded in the market. The duration of the fund is around 100 days, while weighted average portfolio maturity is close to 1.65 years.-PR
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