Fitch Affirms Krungsri Cash Management Fund at AAAmmf(tha)

Stocks and Financial Services Press Releases Tuesday November 19, 2013 17:34
Bangkok--19 Nov--Fitch Ratings

Fitch Ratings (Thailand) has affirmed Thailand-based Krungsri Cash Management Fund’s (KFCASH) National Scale Money Market Fund Rating at ‘AAAmmf(tha)’. The money market fund is managed by Krungsri Asset Management Company Limited (KSAM).

KEY RATING DRIVERS
The main drivers of the affirmations are:
  • The portfolio’s overall credit quality and diversification
  • Short maturity profile
  • Minimal exposure to interest rate and spread risks
  • Strong liquidity profile, and
  • The capabilities and resources of KSAM as investment manager
Portfolio Credit Quality/Diversification

Consistent with Fitch’s ‘AAAmmf(tha)’ criteria, KFCASH maintains a high credit quality portfolio by investing exclusively in short-term securities rated at least ‘F1(tha)’ by Fitch or of a comparable credit quality by other rating agencies. The fund maintains a minimum 70% of its investment in government securities. Counterparty risk is limited by transacting with entities rated ‘F1(tha)’ or higher. The funds also limit concentration risk arising from exposures to individual issuers and counterparties, which is consistent with Fitch’s criteria.

In the 12 months to 11 November 2013, the fund has invested more than 98% in government short-term securities, resulting in a very low Portfolio Credit Factor, a risk-weighted measure of the credit quality and maturity profile of the fund’s portfolio securities, of below 0.1.

Maturity Profile

KFCASH seeks to limit interest rate and spread risk, which is consistent with Fitch’s ‘AAAmmf(tha)’ criteria as the fund limits its weighted average maturity to reset date (WAM) to 60 days and its weighted average life (WAL) is maintained below the 120-day guideline set in Fitch’s rating criteria. The fund is typically invested in fixed-rate securities, resulting in similar levels between its WAM and WAL. The fund’s WAM was below 40 days as of 11 November 2013. The fund also limits the final maturity of any investments to 193 days or less.

Liquidity Profile

KFCASH seeks to manage investor redemption risk by maintaining sufficient level of daily and weekly liquidity. As per the fund’s investment policy, more than 70% of the portfolio is in securities maturing overnight and assets recognised as eligible as overnight (i.e. government and Bank of Thailand securities maturing within 95 days). The fund has adjusted its guideline to hold securities strictly maturing within 10 days to 15% of portfolio from 20%. This has been offset by reduced investor concentration for the past year.

Fund Objectives

The objective of KFCASH is to offer capital preservation and liquidity, while providing a competitive level of return. The fund pursues its investment objective by investing mainly in government and Bank of Thailand money market instruments. The remaining (up to 30%) is invested in the financial institutions sector in form of saving accounts and repurchase agreements. The fund is restricted from investing in securities issued by corporates. As of 11 November 2013, the fund’ total assets under management (AUM) stood at THB 12.2bn.

Investment Manager

KSAM is 76.6% owned by Bank of Ayudhya (‘AA-(tha)’/RWP/‘F1+(tha)’). At end-October 2013, KSAM had THB187.5bn in total AUM. Approximately 73% of AUM was mutual funds while private and provident funds made up the rest. With a market share of 4.8%, KSAM ranked 7th in the mutual fund business with 99 funds under its management. KSAM has adequate compliance, monitoring, investment decision-making processes and fund support consistent with the fund’s rating.

RATING SENSITIVITIES

The ratings may be sensitive to material changes in the credit quality or market risk profiles of the respective funds. A material adverse deviation from Fitch’s guidelines for any key rating driver could lead to the rating being downgraded by Fitch. For additional information about Fitch’s money market fund ratings guidelines, please see the criteria referenced below.

To maintain the National Money Market Fund rating, Fitch seeks weekly fund and portfolio holdings information from KSAM and conducts surveillance checks against its investment guidelines.

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