Bangkok--12 Jul--Fitch Ratings
Fitch Ratings (Thailand) has affirmed two Thailand-based money market funds managed by TMB Asset Management Co., Ltd. (TMBAM) as follows:
TMB Treasury Money Fund (TMBTM) affirmed at ‘AAAmmf(tha)’
TMB Money Fund (TMBMF) affirmed at ‘AAAmmf(tha)’
The ratings reflect the portfolios’ overall credit quality and diversification as well as the funds’ high level of daily and weekly liquidity consistent with their investor profiles and concentration. The ratings also reflect the capabilities and resources of TMBAM as investment manager.
TMBTM’s and TMBMF’s investment objectives are to preserve principal and provide investors liquidity through limiting credit, market and liquidity risk. Both funds pursue their investment objectives by investing in high-quality short-term debt securities including Thai government securities, time deposits, bills of exchanges, promissory notes, and repurchase agreements (repos). As of 22 June 2012, TMBTM and TMBMF had approximately THB21bn and THB13.8bn, respectively, in total assets under management.
Consistent with Fitch's 'AAAmmf(tha)' criteria, TMBTM and TMBMF seek to maintain high credit quality by investing exclusively in short-term securities rated at least ‘F1(tha)’ by Fitch or of comparable credit quality by other rating agencies. The funds also maintain a minimum 50% of their investments in ‘F1+(tha)’ securities while their repo counterparties are highly rated and transactions fully collateralised. In line with the same criteria, the funds limit their exposure to individual issuers and counterparties.
Over the last 12 months to 22 June 2012, both funds’ Portfolio Credit Factor, which is a risk-weighted measure of the credit quality and maturity profile of the funds’ portfolio securities, met Fitch's 'AAAmmf(tha)' criteria of 1.50 or less.
TMBTM has a policy not to invest in corporate securities while TMBMF limits its investment in corporate securities to 15% of the portfolio. The risk of TMBMF’s exposure to corporate securities, however, is mitigated by the securities’ high credit quality and short maturity
The funds seek to control their interest rate exposure by limiting its weighted average maturity to reset date (WAM) to 60 days, consistent with Fitch's 'AAAmmf(tha)' criteria. Since the last rating action in July 2011, TMBTM’s WAM has been within the limit while TMBMF’s WAM occasionally exceeded the limit due to its declining asset size and investments in longer-dated securities. However, the fund’s historical breaches were brief and not excessive. At the same time, the risk posed by such breaches is mitigated by high portfolio liquidity and a focus on government securities. TMBAM still aims to keep TMBMF’s WAM at no more than 60 days.
The funds do not set a limit on weighted average life (WAL) but all of their investments are in fixed-rate securities resulting in similar levels between their WAM and WAL. As of 22 June 2012, TMBTM’s and TMBMF’s WAM was 58.2 and 57.5 days, respectively. The maturity profiles of the funds’ individual investment are consistent with Fitch’s criteria of 397-day maximum maturity limit for non-government securities and fixed-rate government securities.
The funds seek to manage investor redemption risk by maintaining sufficient levels of daily and weekly liquidity. In line with Fitch's criteria, the funds invest at least 10%-15% of its total assets in securities maturing overnight or other qualified assets and at least 25%-30% of its total assets in securities maturing within seven business days or other qualified assets. Both funds have fully met these liquidity requirements over the past 12 months, reflecting their high level of investments in short-term government securities. As of 22 June 2012, TMBTM’s daily and weekly liquidity (including qualified assets such as T-bills) was at 89% of its total assets while TMBMF had 55% in daily liquidity and 60% in weekly liquidity.
Established in 1996, TMBAM’s major shareholder is TMB Bank (‘A+(tha)’/Stable/‘F1(tha)’), Thailand’s seventh-largest commercial bank, with a 75% stake. As of end-June 2012, TMBAM was ranked sixth in Thailand’s mutual fund business with 69 funds representing THB142bn worth of assets under management. Fitch notes that TMBAM has compliance, monitoring, investment decision-making processes and fund support consistent with the funds’ ratings.
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 guidelines for any key rating driver could lead to the rating being downgraded by Fitch. For additional information about Fitch money market fund ratings guidelines, please see the criteria referenced below, which can be found on Fitch’s website.
To maintain the National Money Market Fund rating, Fitch seeks weekly fund and portfolio holdings information from TMBAM and conducts surveillance checks against its investment guidelines.