Bangkok--5 Jul--Fitch Ratings
Fitch Ratings (Thailand) has affirmed Thailand-based TMB Treasury Money Fund (TMBTM) and TMB Money Fund (TMBMF) at ‘AAAmmf(tha)’. Both money market funds are managed by TMB Asset Management Co., Ltd. (TMBAM).
KEY RATING DRIVERS
The main drivers of the affirmations are:
- The portfolios’ overall credit quality and diversification
- Minimal exposure to interest rate and spread risks
- High level of daily and weekly liquidity consistent with their investors profile and concentration
- The capabilities and resources of TMBAM as investment manager
Portfolio Credit Quality/Diversification
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 a comparable credit quality by other rating agencies. The funds also maintain a minimum 50% of their investment in ‘F1+(tha)’ securities while their repurchase agreement (repo) counterparties are highly rated with transactions being fully collateralised. In line with the same criteria, the funds limit their exposure to individual issuers and counterparties.
Over the last 12 months to 21 June 2013, 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. Over the past 12 months to 21 June 2013, TMBMF has invested more in corporate securities and somewhat close to the 15% limit. The risk of TMBMF’s exposure to corporate securities, however, is mitigated by the securities’ high credit quality and short maturity.
Maturity Profile
The funds seek to limit interest rate and spread risk consistent with Fitch's 'AAAmmf(tha)' criteria. Each fund limits its weighted average maturity to reset date (WAM) to 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 21 June 2013, TMBTM’s and TMBMF’s WAM was below 57 and 59 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.
Liquidity Profile
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 21 June 2013, TMBTM’s daily and weekly liquidity (including qualified assets such as T-bills) was more than 90% of its total assets while TMBMF had more than 65% in daily liquidity and weekly liquidity. As of 21 June 2013, TMBMF invested about 64% of its total assets in short-term government debt. For the past year, the funds have maintained exposure to securities strictly maturing in less than seven days between 2% and 26% of their total assets.
Fund Objectives
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 debt securities, time deposits, bills of exchanges, promissory notes, and repos. As of 21 June 2013, TMBTM and TMBMF had approximately THB22.5bn and THB10.1bn, respectively, in total assets under management (AUM).
Investment Manager
Established in 1996, TMBAM’s major shareholder is TMB Bank (A+(tha)/Stable/F1(tha)), Thailand’s seventh-largest commercial bank, with a 87.5% stake. As of end-May 2013, TMBAM was ranked fifth in Thailand’s mutual fund business with 68 funds representing THB181bn worth of AUM. TMBAM has adequate compliance, monitoring, investment decision-making processes and fund support consistent with the funds’ ratings.
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 TMBAM and conducts surveillance checks against its investment guidelines.