First SL fund rating by Fitch – Ceylon Income Fund gets ‘A-(lka)’
View(s):Ratings agency Fitch recently issued its first rating for a Sri Lankan investment fund, the Ceylon Income Fund, according to a statement. Managed by Ceylon Asset Management, the fund primarily invests in corporate debt instruments. Fitch has also stated that this was the “first fund rating assigned by an international rating agency in Sri Lanka”.
Assigning the fund a “A-(lka)” National Fund Credit Rating, Fitch also indicated that the fund’s rating is “driven by the fund’s weighted average rating factor (WARF) and rating distribution while reflecting Fitch’s opinion that the fund is moderately concentrated… Fitch has rated the fund on the basis of its understanding that the majority of investors in the fund are not exposed to mark-to-market risk.
Instead, Fitch understands that the vast majority of investors are duration matched, i.e. investors enter the fund with a specified maturity which is matched to the maturity of securities in the fund”.
Fitch also noted that the “negative modifier in the fund’s ‘A-(lka)’ National Fund Credit Rating reflects Fitch’s view that the fund is moderately concentrated with a top-five issuer concentration of around 75% of the portfolio. Fitch’s review of historic portfolio holdings indicates that the fund’s credit quality has improved year to date and Fitch expects the fund’s weighted average credit quality to remain stable, supported by the fund’s investment guidelines which limit it to investments in investment-grade rated issuers only. The majority of issuers in the portfolio are rated in the ‘A(lka)’ and ‘BBB(lka)’ rating categories. Around 8% of securities in the portfolio had a Negative Outlook as of July 2012, but no securities were on Rating Watch Negative”. (JH)
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