Bangkok--7 Aug--Fitch Ratings
Fitch Ratings (Thailand) Limited has today affirmed TMB Money Fund’s (TMBMF) National fund ratings at ‘AAA(tha)’/‘V1+(tha)’. The fund is managed by TMB Asset Management Company Limited (TMBAM).
The ratings affirmation is based on the credit quality, diversification and liquidity of the fund’s assets as well as the capabilities of TMBAM in managing the fund. As at 31 July 2009 TMBMF had approximately THB40.2bn in net asset value (NAV). Money market funds in this rating category meet the highest standards for credit quality, conservative investment policies and safety of principal, relative to other bond funds in Thailand.
The fund’s objectives are to provide stable returns, capital preservation and high liquidity. Broad investment guidelines of the fund have largely remained unchanged since 2007. Its segment allocation strategy is to invest at least 20% of its NAV in government or central bank securities, or those guaranteed by the government, and at least 55% in securities issued by financial institutions. Investment in securities issued by corporate entities is limited at up to 15% of the fund’s NAV. The maximum maturity of tradable securities held by the fund is 92 days, with the exception of up to 5% of the fund’s NAV in time deposits and banks’ non-callable promissory notes maturing within 365 days.
To manage liquidity, the fund must maintain its weighted average maturity (WAM) within 60 days, and maintain at least 5% of its NAV in cash and cash equivalent. The fund may also invest in foreign papers with full hedging in place, and with some restrictions in maturity, total exposure, minimum credit ratings of securities, and minimum credit ratings of counterparties of the hedging agreements.
To maintain the highest level of credit quality, the fund has to invest exclusively in securities with at least Fitch’s Short-term rating of ‘F1(tha)’, or its equivalent. In addition, at least 50% of the fund’s NAV must be invested in securities with Fitch’s Short-term rating of ‘F1+(tha)’ or its equivalent, and investments in time deposits of ‘F1(tha)’-rated banks must not exceed 5% of the fund’s NAV.
TMBAM has been able to manage TMBMF according to the fund’s investment guidelines. While there were certain periods in which the fund’s holdings were not consistent with its investment guidelines, those inconsistencies were mostly due to the decrease in the fund’s NAV and its more conservative investment policy.
As at 31 July 2009, TMBMF had 50% of NAV invested in government securities and 72% of NAV invested in ‘F1+(tha)’rated securities. Securities maturing within seven days including cash accounted for 12% of the fund’s NAV. The average WAM of the portfolio during the past 12 months is 38 days, with a maximum of 50 days. The top 10 largest unit holders have not exceeded 15% of the fund’s NAV.
TMBAM was founded in 1996 to operate a mutual fund business. The major shareholder is TMB Bank, Thailand’s sixth-largest commercial bank, with a 75% stake. As at end-June 2009, TMBAM ranked fifth in terms of market share in mutual fund business with 61 funds under its management representing THB143.3bn worth of assets under management. Fitch views that TMBAM has adequate compliance, monitoring and investment decision-making processes in place to ensure consistent performance in required investment practices.
Fitch’s benchmark guidelines for ‘AAA(tha)’ and ‘AA(tha)’ rated money market funds require that the portfolios cannot hold any securities below ‘Tier 1’. Tier 1 securities consist of those rated ‘A(tha)’ or ‘F1(tha)’ and above by Fitch, or its equivalent. The ‘V1+(tha)’ rating is assigned only to money market funds that would not experience a loss of principal value even in adverse interest rate environments.
On January 26 2009, Fitch issued an exposure draft, ‘Exposure Draft: Global Money Market Fund Rating Criteria’, outlining proposed criteria changes for rating global money market funds. The report is available at www.fitchratings.com.
Contacts: Orawan Karoonkornsakul, Pramook Malasitt, Vincent Milton, Bangkok, +662 655 4755.
Disclosure: TISCO Asset Management Company Limited and Kasikorn Asset Management Company Limited each hold a 10% stake 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.
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 National Long-term 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.
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.