Bangkok--23 Nov--Fitch Ratings
Fitch Ratings (Thailand) Limited has today affirmed AYF Cash Management Fund's (AYFCASH) National Fund Credit and National Fund Volatility Ratings at 'AAA(tha)'/'V1(tha)'. This follows the review of Fitch's global bond fund rating criteria. AYFCASH falls under Fitch's sector criteria addendum for Short-term Bond Funds.
The affirmation of the fund credit rating is mainly supported by the portfolio's strong credit quality, as measured by its weighted average rating factor (WARF), as well as AYFCASH's ability to adhere to its conservative investment guidelines, which are consistent with Fitch's criteria at the 'AAA(tha)' rating level. Meanwhile, the affirmation of the fund volatility rating is underpinned by the portfolio's high proportion of highly-rated short-term assets. AYFCASH's market risk factor remains low and consistent with the 'V1(tha)' rating level. While funds rated 'AAA(tha)'/'V1(tha)' are expected to offer good liquidity and limited risk on net asset value (NAV), they have different risk profiles compared with funds rated on Fitch's money market fund scale (denoted with the 'mmf' subscript). AYFCASH complies with many of Fitch's money market fund criteria but keeps some flexibility, for example in terms of liquidity, and is therefore rated as a short term bond fund.
"The ratings of AYFCASH are based on the fund's strong credit quality and low sensitivity to market risk. Over the past year, all of its investments have been in 'F1+(tha)' securities with a 95.5% minimum holding of 'AAA(tha)' rated securities. The majority of its investments have been in government securities. In terms of market risk, AYFCASH has kept its investments mainly in highly rated securities with remaining maturity of up to 90 days; although the fund's investment guidelines allow the maximum maturity of each security at 193 days. Its weighted average duration ranged between 0.05 to 0.11 years over the past year, reflecting high liquidity and low market risk. The fund's investor concentration is high but the risk is mitigated by its high level of liquid assets," says Orawan Karoonkornsakul, Fitch's Senior Director of Structured Finance and Funds in Thailand.
AYFCASH is an open-ended, short-term fixed-income fund, investing mainly in short-term government papers, and highly rated short-term fixed-income instruments. Under its investment policies, the fund must invest at least 70% of its NAV in short-term government securities or in issues guaranteed by the government. The fund is allowed to invest in financial institution papers with a maximum of 15% of the fund's NAV. In terms of credit quality, at least 85% of the fund's NAVs must be invested in 'AAA(tha)'-rated securities, and the remaining in securities with a minimum rating of 'AA-(tha)'. The portfolio duration is targeted at not longer than 0.16 years.
AYFCASH is managed by Ayudhya Fund Management Company Limited (AYF), which is 76.6% owned by Bank of Ayudhya ('AA-(tha)'/Stable/'F1+(tha)'). At end-October 2010, AYF had THB86.7bn in total assets under management (AUM). Approximately 62% of AUM was mutual funds while private and provident funds contributed the remaining. With a market share of 2.8%, AYF ranked 8th in the mutual fund business with 83 funds under its management.
The fund credit rating is an opinion of the vulnerability to losses as a result of defaults in a bond fund portfolio, and is based on Fitch's view of the actual and prospective average credit quality of the fund's invested portfolio. The fund volatility rating is an opinion of the relative sensitivity of a portfolio's total return (including income and market value) and/or NAV to assumed changes in credit spreads and interest rates, as well as other market risk parameters. In Thailand, 'AAA(tha)' remains the highest National Fund Credit Rating for bond funds while 'V1(tha)' is now the highest National Fund Volatility Rating that a bond fund can achieve. In July 2010, Fitch has introduced a new money market fund rating scale in Thailand, which clearly segregates the ratings of money market funds and bond funds by denoting 'mmf' for money market fund ratings.