Fitch Assigns NDB Wealth Money Fund First-Time ‘AA+f(lka)’ and ‘S2(lka)’

Fitch Ratings has assigned NDB Wealth Money Fund a National Fund Credit Quality Rating (FCQR) of ‘AA+f(lka)’ and a National Fund Market Risk Sensitivity Rating (MRSR) of ‘S2(lka)’.

KEY RATING DRIVERS

The FCQR reflects the high credit quality of the fund’s underlying assets. Fitch bases the rating on the fund’s actual and prospective credit quality. The weighted-average rating factor (WARF) suggested a rating of’ AAAf(lka)’ at end-August 2026. However, the fund’s investment guidelines provide flexibility to invest in money market instruments other than government securities, which could lower the portfolio’s aggregate credit quality. Fitch has therefore assigned the FCQR at ‘AA+f(lka)’.

The MRSR reflects the fund’s low sensitivity to interest-rate and spread risk. The rating also reflects Fitch’s treatment of repurchase agreements (repos) with non-investment-grade counterparties, for which the maturity of the underlying collateral can increase the fund’s calculated market-risk exposure.

ASSET CREDIT QUALITY

The portfolio’s WARF primarily drives the FCQR. The WARF reflects the credit ratings and remaining term to maturity of the securities held in the portfolio, weighted by market value. The fund mainly invests in Sri Lankan government securities, repos backed by Sri Lankan government securities and time deposits with financial institutions. Its WARF at end-August 2026 was 0.15, consistent with an ‘AAAf(lka)’ rating range of 0.0-0.3.

For repos with counterparties unrated by Fitch, Fitch uses the rating and maturity of the collateral in calculating the WARF. Where an investment-grade repo counterparty is rated below the collateral, Fitch uses the collateral rating and the repo contract’s original maturity. The fund’s investment guidelines permit investment in instruments other than government securities, including bank deposits. This flexibility could result in a weaker portfolio WARF than indicated by the current portfolio. The ‘AA+f(lka)’ rating therefore incorporates Fitch’s assessment of both current and prospective portfolio credit quality.

PORTFOLIO SENSITIVITY TO MARKET RISK

Fitch’s proprietary market risk factor (MRF), which measures the fund’s sensitivity to market risk, is within the ‘S2(lka)’ range of 2.0-4.0. The fund’s MRF is higher than its relatively short portfolio maturity might otherwise suggest because, for repos with non-investment-grade counterparties, Fitch incorporates the maturity of the underlying collateral rather than the contractual maturity of the repo. Longer-dated collateral can therefore increase the MRF even where the repo itself is short-dated. This treatment constrains the fund’s MRSR at’S2(lka)’.

FUND PROFILE

The fund, launched in 2012 as the Eagle Money Fund, is an open-end money market fund domiciled in Sri Lanka (Long-Term Issuer Default Rating: B-) and regulated by the country’s Securities and Exchange Commission. It seeks to provide liquidity and above-average returns through investments in short-term government securities and high-credit-quality Sri Lankan rupee-denominated bank deposits. The fund’s assets are segregated and held with its trustee, Hatton National Bank PLC (National Long-Term Rating: AA-(lka)/Stable). The fund’s assets under management (AUM) totaled LKR55 billion at end-August 2026.

INVESTMENT MANAGER

Fitch considers the investment manager, NDB Wealth Management Limited, to be a suitably qualified, competent and capable of managing the fund. The company was incorporated in 1992 as CTC Eagle Fund Management Company Limited. It was renamed Eagle NDB Fund Management Company Limited. in 1997 and NDB Aviva Wealth Management Limited in 2009, before adopting its current name in 2013.

NDB Wealth Management is a subsidiary of NDB Capital Holdings Limited, which is ultimately owned by National Development Bank PLC (NDB) . NDB owns around 99.9% of NDB Capital Holdings, which in turn owns about 99.99% of NDB Wealth Management. The remaining minority interest is held by a sister company.

NDB Wealth Management is licensed by the Securities and Exchange Commission of Sri Lanka as a unit trust management company and investment manager. It manages unit trusts across money market, equity, fixed-income and sharia-compliant strategies, as well as discretionary investment portfolios for institutional and individual clients.

NDB Wealth Management is Sri Lanka’s second-largest asset manager, with mutual fund AUM of LKR145 billion as of end-September 2026, representing 25% of the country’s mutual funds market. The company manages three money market funds (50% of AUM), two income funds (46%) and one equity fund (2%) one balanced fund (2%) and one gilt-edged fund (0%).

RATING SENSITIVITIES

Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade

The ratings may be sensitive to significant changes in the fund’s credit quality or market-risk profile. A large, adverse deviation from Fitch’s guidelines for any key rating driver could lead to a downgrade.

The FCQR could be downgraded if the fund materially increases exposure to lower-credit-quality assets, resulting in a sustained deterioration in its WARF.

The MRSR could be downgraded if the fund materially increases its duration or its exposure to repos with non-investment-grade counterparties backed by longer-dated collateral, resulting in a higher MRF.

Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade

The FCQR could be upgraded if the fund maintains portfolio credit quality consistent with a higher rating on a sustained basis, including a stable allocation to higher-credit-quality assets.

The MRSR could be upgraded if the fund’s market-risk profile declines sufficiently for its MRF to be sustained within the range consistent with a higher MRSR.