Bangkok--8 Sep--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 investor 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. In line with the same criteria, the funds limit their exposure to individual issuers and counterparties.
Over the last 14 months to 22 August 2014, 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 of not investing in corporate securities while TMBMF limits its investment in corporate securities to 15% of the portfolio. Over the past 14 months to 22 August 2014, TMBMF’s investment in corporate securities has been 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 22 August 2014, TMBTM’s and TMBMF’s WAM was below 58 and 56 days, respectively. The maturity profiles of the funds’ individual investments are consistent with Fitch’s criteria, with the maturities of the non-government securities and fixed-rate government securities not exceeding the 397-day limit.
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 their total assets in securities maturing overnight or other assets that qualify as such and at least 25%-30% of their total assets in securities maturing within seven business days or other assets as qualify as such. Both funds met these liquidity requirements over the past 14 months, reflecting their high level of investments in short-term government securities. As of 22 August 2014, more than 90% of TMBTM’s total assets were in assets classified as daily and weekly liquidity (including assets such as T-bills), while TMBMF had more than 75% of its total assets in such investments. As of 22 August 2014, TMBMF invested about 75% of its total assets in short-term government debt. For the past year, the funds had between 1% and 26% of their total assets invested in securities that strictly mature in less than seven business days.
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 22 August 2014, TMBTM and TMBMF had approximately THB17.5bn and THB8.6bn, 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-June 2014, TMBAM ranked seventh in Thailand’s mutual-fund business with 60 funds representing THB181bn of AUM. Fitch notes that 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 funds. A material adverse deviation from Fitch’s guidelines for any key rating drivers 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.