JCR-VIS Upgrades Management Quality Rating of Al Meezan Investment Management Limited to AM2+
Karachi, December 03, 2014 (PPI-OT): JCR-VIS Credit Rating Company Ltd. (JCR-VIS) has upgraded the Management Quality Rating of Al Meezan Investment Management Limited (Al-Meezan) from ‘AM2’ (AM-Two) to ‘AM2+’ (AM-Two Plus). Outlook on the assigned rating is ‘Stable’. The previous rating action was announced on May 14, 2013.
As the only asset management company exclusively offering Shari’ah compliant investment products in Pakistan, the franchise of Al-Meezan has continued to strengthen over time, as manifested in consistent increase in market share.
Al-Meezan is also the largest private sector asset management company in terms of total Assets under Management (AUMs). The AMC’s penetration in retail segment compares favorably to peers; in view of this, the company is less likely to be affected by the recent changes in relation to income tax on mutual funds investments by corporate entities introduced in Finance Bill and other regulatory changes introduced by the State Bank of Pakistan over time.
Franchise of the institution is also supported by the sound performance indicators of funds under management. The company is managing ten funds, in addition to a voluntary pension scheme and Separately Managed Accounts (SMAs).
Over an extended timeframe, equity portfolios under management have generated competitive returns in relation to peers. Income funds have also posted more or less consistent performance over time. Market factors such as availability of GoP Ijarah Sukuk may continue to instigate some degree of volatility in returns of income funds, which have significant exposure in these instruments.
The inability of Islamic income funds to lock in long term returns may affect the returns of these funds more significantly than their conventional counterparts, in a declining rate scenario. This may result in withdrawals, as seen in case of Meezan Cash Fund, which witnessed substantial redemptions in the out-going year. In general, the limited availability of Shariah compliant income/money market instruments may pose challenge for managing Islamic funds.
The rating assessment draws comfort from the investment management process in place and the profile of personnel holding key management positions; which have now had a lengthy association with the company.
The research function is well established and provides adequate support to the investment management team. Over time, the company plans to completely segregate the managers of mutual funds from those of SMAs; currently, some fund managers are also assigned SMAs. Policy documentation and implementation remains largely a well addressed area across the organization.
There has been turnover in control functions including risk and internal audit, where replacements have been inducted in a timely manner; however, stability in these areas is also considered essential.
With majority stake in the AMC held by Meezan Bank Limited (MBL), three out of the eight members on the Board are representatives of the bank, including the Chairman. In addition to a shared franchise, Al-Meezan draws support from MBL in the area of IT.
MBL has recently deployed T-24 for its core banking operations. The asset management module of this system has been implemented at Al-Meezan for unit-holders records; implementation in other areas is in progress. Moreover, MBL is the Shariah Advisor to the AMC’s funds. Investment screening criteria are actively monitored to ensure Shariah compliance for all exposures assumed by the AMC or the funds.
For more information, contact:
Ms. Sobia Maqbool
JCR-VIS Credit Rating Company Limited
VIS House, 128/C,
25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi
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