Bangkok--4 Aug--Fitch Ratings
Fitch Ratings (Thailand) Limited has upgraded the National fund credit rating of AJF Cash Management Fund (“AJFCASH”), managed by Ayudhya JF Asset Management Limited (“AJF”) , to ‘AAA(tha)’ from ‘AA(tha)’, while affirming the National fund volatility rating at ‘V1(tha)’.
The upgrade reflects the more conservative investment restrictions and guidelines (“IRGs”) imposed on the fund. The fund has also been performing well in terms of providing low risk investments and stable returns. Under the new IRGs implemented in June 2006, AJFCASH has invested at least 85% of the fund’s NAV in ‘AAA(tha)’ assets, with the remainder in paper that has minimum ratings of ‘AA-(tha)’ (AA minus(tha)). Under the previous IRGs, the fund had to hold at least 70% of its NAV in government bond instruments and was allowed to invest a maximum of 15% in corporate issues with a minimum rating of ‘BBB+(tha)’ and a maximum of 15% in financial institution paper with no minimum rating requirement.
The agency notes that the performance of the fund since September 2005, when it was first rated, has been satisfactory. The fund held more than 90% of its NAV in ‘AAA(tha)’ assets. The portfolio maturity is also low due to its high holdings of treasury bills and Bank of Thailand bonds that have short maturities. At end-July 2006, 94% of the portfolio was invested in ‘AAA(tha)’ assets, 2% in ‘AA+(tha)’, and 4% in ‘AA(tha)’ assets, while the average portfolio duration was 0.10 of a year.
Fitch notes that the fund’s management team appears experienced and capable, although the industry is generally subject to turnover risk of key staff. Its operational controls, which have also been strengthened after the implementation of a new investment management system, are adequate to fulfill the standards of required investment practices. Although the investor concentration - as a result of the top five investors historically owning 30% to 50% of the fund - poses moderate risk, this should be mitigated by the fund’s policy of investing mainly in liquid instruments.
AJFCASH is an open-ended, short-term, fixed-income fund, mainly invested in short-term government debt instruments, bank deposits and highly rated short-term, fixed-income instruments. The asset manager, AJF is a Thailand-based, joint-venture asset management company. AJF’s major shareholders comprise Bank of Ayudhya and JPMorgan Asset Management, 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%).
AJFCASH’s fund credit rating reflects the average credit quality of the fund’s overall portfolio and its investment policies. A National fund credit rating of ‘AAA(tha)’ indicates the highest credit quality standards relative to other bond funds in Thailand in terms of portfolio assets, diversification, investment management and operational capabilities. The volatility rating reflects the risk-adjusted duration of the fund’s investments, which incorporates interest rate, credit spread, liquidity, derivative and other applicable risk factors. 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 the 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.
Contacts: Lertchai Korcharoenrattanakul, Napachak Phasukavanich, Vincent Milton, +662 655 4755
Note to Editors: Fitch’s National 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.
Disclosure: TISCO Asset Management Company Limited and Kasikorn Asset Management Company Limited each hold 10% of the shares in Fitch Ratings (Thailand) Limited. No shareholder, other than Fitch Ratings Limited of the UK, is involved in the day-to-day operation of, or credit rating reviews undertaken by, Fitch Ratings (Thailand) Limited.
Fitch’s rating definitions and the terms of use of such ratings are available on the agency’s public site, www.fitchratings.com . Published ratings, criteria and methodologies are available from this site, at all times. Fitch’s code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the ‘Code of Conduct’ section of this site.