The 1.16 billion rupee open ended fund invests in Sri Lanka government securities and bank deposits are limited to 15 percent of assets. The deposits are placed for three months or less in banks with a rating of AA or above.
The full statement is reproduced below:
ICRA Lanka reaffirms [SL] AAAmf mutual fund rating to NDB Wealth Management’s Gilt Edged Fund
ICRA Lanka Limited, a wholly owned subsidiary of ICRA Ltd., an associate of Moody’s Investors Service, has reaffirmed its credit risk rating of ‘[SL] AAAmf’ issued to NDB Wealth Management’s Eagle Gilt Edged Fund. The rating indicates that the underlying portfolio has the lowest credit risk and the highest degree of safety from credit losses.The rating in Sri Lanka is assigned on an eight-point scale developed specifically for the country, and ranges from ‘[SL] AAA’ to ‘[SL] D’. The suffix of “mf” is to denote that the rating pertains to the local mutual fund schemes. This rating scale ranks the relative default risk associated with issuers/debt/schemes in Sri Lanka.
Asset Management Company and Fund Details
The Eagle Gilt Edged Fund is part of the “myeaglefunds” family of mutual funds and is one of the fixed income funds managed and marketed by NDB Wealth Management Limited. The asset management company, previously known NDB Aviva Wealth Management Limited was owned 51:49 by National Development Bank Plc (NDB), and Aviva Group, sixth largest insurance group in the world respectively. However in Dec-12 subsequent to AIA Group Limited acquiring a 92.3 per cent stake in Aviva NDB Insurance from Aviva and NDB, the 49% ownership in NDB Wealth Management held by Aviva was transferred to NDB Capital Holdings PLC, thus making NDB Wealth Management a 100% subsidiary of the NDB Bank. Since then the company has rebranded itself from NDB Aviva Wealth Management to NDB Wealth Management Limited.
The Eagle Gilt Edged Fund was established in 1997 and has a track record of 15 years and has been established under the SEC Act No 36 of 1997 amended Act No 26 of 1991 and the Unit Trust Code of 1994. The NDB Wealth Management is one of the largest private sector fund management company, in Sri Lanka with over LKR 59 Billion of assets under management as at December 2012, of which mutual funds under management amounted to over LKR 12.0 Bn. The company is licensed with and regulated by the Securities and Exchange Commission of Sri Lanka (SEC) as a Unit Trust Fund Manager.
The Fund is an open ended Government of Sri Lanka securities fund with an objective of maximising returns from investments in government securities and government guaranteed securities. The fund may also invest in short term deposits of commercial banks. The funds/assets under management stood at LKR 1,167.60 million as at December 2012 and had an average residual maturity of around 0.11 years as on that date. The rating factors in the commitment to restrict bank deposits to under 15% of the assets and such deposits to be placed for tenures of less than 3 months with banks having a high external credit rating of AA or above.
ICRA Lanka’s Credit Quality Rating Methodology for debt mutual fund schemes ICRA Lanka’s mutual fund rating methodology is based on evaluating the inherent credit quality of the funds portfolio. As a measure of the credit quality of a debt fund’s assets, ICRA Lanka uses the concept of “credit scores”. These scores are based on ICRA Lanka’s estimates of credit risk associated with each exposure of the portfolio taking into account its maturity. To quantify the credit risk scores, ICRA Lanka uses its database of historical default rates for various rating categories for various maturity buckets.
The credit risk ratings incorporate ICRA Lanka’s assessment of a debt fund’s published investment objectives and policies, its management characteristics, and the creditworthiness of its investment portfolio. ICRA Lanka reviews relevant fund information on an ongoing basis to support its published rating opinions. If the portfolio credit score meets the benchmark of the assigned rating during the review, the rating is retained. In an event that the benchmark credit score is breached, ICRA Lanka gives a month’s time to the debt fund manager to bring the portfolio credit score within the benchmark credit score. If the debt fund manager is able to reduce the portfolio credit score within the benchmark credit score, the rating is retained. If the portfolio still continues to breach the benchmark credit score, the rating is revised to reflect the change in credit quality.