Bangkok--Sep 5--Fitch Ratings
Fitch Ratings (Thailand) Limited today assigned a National bond fund rating of ‘AA(tha)’/‘V1(tha)’ to AJF Cash Management Fund (“AJFCASH”). This is the first time a bond fund has received a rating in Thailand. The fund’s investment objectives are to maintain a high level of liquidity, while providing investors with low risk portfolios, yielding stable total returns, benchmarked to deposit rates and government bonds. The fund’s policy is to invest at least 70% of its assets in short-term government bonds with remaining assets in highly-rated corporate and financial institutions’ bonds.
Asset allocations are geared toward short-term liquid bonds and other fixed income instruments such as treasury bills and bills of exchange given the likelihood of potentially large redemptions and subscriptions, reflecting the nature of the fund as a cash management tool. At end-July 2005, around 84% of the portfolio was invested in ‘AAA(tha)’ fixed income securities, divided among government bonds (79%) and financial institutions bonds (5%), with the remainder invested in bonds rated ‘A-(tha)’ (A minus (tha)) or above.
Fitch notes the fund management team appears experienced and capable, although the industry is generally subject to turnover risk for key staff. Its operational controls are adequate to perform the required investment practices. Although the investor concentration - as a result of top five investors historically owning around 30% of the fund - poses moderate risk, this should be mitigated by the fund’s policy of investing mainly in liquid instruments.
The asset manager, Ayudhya JF Asset Management Limited (“AJF”) was founded in 1996 as a Thailand-based, joint-venture asset management company. AJF’s major shareholders comprise Thailand’s sixth-largest bank, Bank of Ayudhya (“BAY”), and JPMorgan Asset Management (“JPMAM”), a leading global investment management company, each owning 38.3% of its stakes, with the remaining stakes owned by Ayudhya Securities (10.0%), Ayudhya Alliance C.P. Life (6.7%) and Ayudhya Insurance (6.7%).
Fitch’s bond fund credit ratings are assessments of the average credit quality associated with securities in the portfolio as a whole. National bond fund credit rating of ‘AA(tha)’ indicates very high credit quality standards relative to other bond funds in Thailand in terms of portfolio assets, diversification, investment management and operational capabilities. National bond fund volatility rating describes the relative sensitivity of a fund’s total return (including price) to changes in interest rates, credit spreads, portfolio liquidity and other market factors in the local market. Bond funds rated ‘V1(tha)’ are considered to have low market risk, relative to other bond funds in Thailand demonstrating relative stability in total returns over short to long-term holding periods. Fitch notes that Thailand’s bond funds generally have short durations and therefore narrowed volatility definitions are required to provide greater differential between rated funds.
CONTACT: Tanawat Roongtanapirom, CFA, Analyst, Tel: +662 655 4758; Lertchai Korcharoenrattanakul, Associate Director, +662 655 4760; Pimolpa Simaroj, Director, +662 655 4761; Vincent Milton, Managing Director, +662 655 4759
Note to Editors: Fitch’s National bond fund credit ratings are assigned on a scale of ‘AAA(tha)’ to ‘D(tha)’, on a rating scale similar to that of Fitch’s Long-term National credit ratings. Meanwhile, the volatility ratings are assigned on a scale of ‘V1+(tha)’ (least volatile) through ‘V10(tha)’ (most volatile). The ratings assigned to the fund are National ratings, and as such, they provide a relative measure of creditworthiness and total return stability only in comparison with other funds in Thailand. They are therefore not internationally comparable. End.