Bangkok--8 Sep--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 for the ratings affirmation 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, consistent with Fitch’s criteria.
In the 12 months to 18 August 2014, more than 97% of the fund’s investments were 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
Consistent with Fitch’s criteria for a 'AAAmmf(tha)' rating, KFCASH seeks to limit interest rate and spread risk by restricting its weighted average maturity to reset date (WAM) to 60 days (below 50 days as of 18 August 2014) and maintaining its weighted average life (WAL) at below 120 days. The fund is typically invested in fixed-rate securities, resulting in similar levels for its WAM and WAL. 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 a sufficient level of daily and weekly liquidity. As per the fund’s investment policy, more than 70% of its portfolio is in securities maturing overnight and other qualified assets (that is, government and Bank of Thailand securities maturing within 95 days). The fund has maintained its guidelines for limiting the amount of securities that mature in 10 days to 15% of its portfolio. Fitch deems the fund’s liquidity risks as limited given KFCASH’s high level of liquid assets, high liquidity baseline, and regular communication with institutional investors.
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 rest (representing up to 30% of NAV) is invested in the financial institutions sector in the form of saving accounts and repurchase agreements. The fund is barred from investing in securities issued by corporates. As of 18 August 2014, the fund’s total assets under management (AUM) stood at THB 17.8bn.
Investment Manager
KSAM is 76.6% owned by Bank of Ayudhya (AAA(tha)/Stable/F1+(tha)), which in turn is 72.0% owned by Bank of Tokyo-Mitsubishi UFJ (A/Stable/F1). At end-June 2014, KSAM had THB250.4bn in total AUM. Approximately 76% of AUM was placed in its mutual funds, while the rest of the AUM was in private and provident funds. KSAM is the sixth-largest mutual fund manager in Thailand with a 5.3% share of AUM in the market spread over 92 funds. KSAM has adequate compliance, monitoring, investment decision-making processes and fund support consistent with the fund’s rating.
RATING SENSITIVITIES
The rating may be sensitive to material changes in the credit quality or market risk profiles of the fund. A material adverse deviation from Fitch guidelines for any key rating drivers could lead to the rating being downgraded by Fitch. For additional information about Fitch’s money market fund rating 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.