Fitch Ratings has today assigned LICMF Mutual Fund Asset Management Company Ltd's (LICMF AMC) LICMF Income Plus Fund a credit rating of 'AA+(ind)' and a volatility rating of 'V1(ind)'.
The credit rating of the fund reflects the high national credit quality of underlying assets, good portfolio diversification and conservative investment policy for credit selection. Securities rated 'AAA(ind)'/'AA(ind)'/'F1+(ind)'/'F1(ind)', or equivalent, constitute, on average, more than 90% of the portfolio. Fitch notes that the credit quality of the fund has remained stable over the last 12 months despite the difficult market conditions.
The volatility rating reflects the fund's low market risk. Funds rated in the 'V1' category exhibit relative stability, performing consistently across a broad range of interest rate scenarios. LICMF Income Plus Fund investment guidelines ensure Weighted Average Days to Final Maturity (WAMF) as well as Weighted Average days to Interest Rate Reset (WAMR) remain below 360 days. Over the past 12 months the average WAMF and WAMR of the fund were at 150 days and 93 days, respectively.
The fund generally follows a hold-to-maturity policy, with respect to short-term debt. A significant portion of portfolio is invested in floating rate notes with daily reset interest rate, thereby reducing the interest rate risk. The fund has typically faced redemption requests of between 5%-10% of AUM on average on a daily basis, with a peak at 36% of AUM in the last 12 months. The fund's liquidity profile, which has been characterised by 30% to 40% of portfolio AUM invested in cash, cash equivalent and certificates of deposits on average, is conservatively positioned, allowing the fund to withstand large potential redemption pressure. The fund's investor base is adequately diversified.
LICMF AMC was appointed by LIC Mutual Fund Trustee Company Private Limited to manage the various funds of LIC Mutual Fund, including LICMF Income Plus Fund. LICMF AMC is a registered portfolio manager under the SEBI Regulations. The fund had INR140.36b of assets under management as of 31 October 2009.
Fitch's National fund credit ratings are assigned on a scale of 'AAA(ind)' to 'C(ind)', on a rating scale similar to that of Fitch's National Long-term credit ratings, with 'AAA(ind)' indicating the highest credit quality standards within the country. The assigned credit rating provides a relative measure of the overall portfolio's credit quality. Fitch's national fund volatility ratings are assigned on a scale of 'V1+(ind)' (least volatile) through 'V10(ind)' (most volatile). The assigned volatility rating provides a relative measure of the sensitivity of a fund's total return to changes in interest rate, portfolio liquidity and other market conditions. These ratings are a relative measure of credit worthiness and volatility in comparison to other bond funds in India. It is therefore not internationally comparable.
Applicable Criteria available on Fitch's website at www.fitchratings.com and www.fitchindia.com: "International Bond Fund Ratings", dated 18 May 2005.
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Note to editors: Fitch's National ratings provide a relative measure of creditworthiness for rated entities in countries with relatively low international sovereign ratings and where there is demand for such ratings. The best risk within a country is rated 'AAA' and other credits are rated only relative to this risk. National ratings are designed for use mainly by local investors in local markets and are signified by the addition of an identifier for the country concerned, such as 'AAA(ind)' for National ratings in India. Specific letter grades are not therefore internationally comparable.
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