Fitch affirms standard bank corporate money market fund

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(The following statement was released by the rating agency) LONDON, April 02 (Fitch) Fitch Ratings has affirmed Standard Bank Corporate Money Market Fund's National Fund Credit Rating at 'AA+(zaf)' and National Fund Volatility Rating at 'V1(zaf)'. The fund is managed by STANLIB Asset Management. KEY RATING DRIVERS: The affirmation of the National Fund Credit Rating is driven by the fund's high and stable credit quality, as reflected by the fund's weighted average rating factor (WARF) and rating distribution. Consistent with the agency's rating criteria the National Fund Credit Rating factors in a one-notch downward adjustment to reflect concentration risk, a structural feature of the South African market. The affirmation of the National Fund Volatility Rating is driven by the fund's low exposure to interest rate risk and spread risk, as reflected in its short maturity profile. ASSET CREDIT QUALITY: The weighted average credit quality of the fund is high, taking into consideration the short maturities of the invested assets and has remained relatively stable over time. The fund primarily invests in issuers rated in the 'F1+(zaf)'/'AA(zaf)' rating category. No securities in the fund's portfolio were on Rating Watch Negative or had a Negative Outlook as of the February 2013 portfolio holdings. CONCENTRATION: In Fitch's opinion, the fund is concentrated, like other South African money market funds rated by the agency, with the top three issuer exposures consistently in excess of 50% of portfolio holdings. In line with its applicable rating criteria, Fitch typically adjusts the WARF-implied Fund Credit Rating of funds it deems concentrated down by one or more notches. Without concentration risk, the fund could achieve a 'AAA(zaf)' National Fund Credit Rating. The concentrated holdings reflect the fund's investment mandate, which limits it to banking issuers, and the structural characteristics of the South African market, with a limited supply of treasury bills, and the five largest banks having a combined market share of around 90%, according to Fitch's estimates. The fund's high credit quality and natural liquidity mitigates concentration risk. Without structural evolution of the South African market which results in a more diverse, high quality and liquid issuance market, it is highly unlikely that Fitch could rate any money market fund higher than 'AA+(zaf)' in South Africa PORTFOLIO SENSITIVITY TO MARKET RISK: The fund is a constant net asset value (NAV) fund, therefore the National Fund Volatility Rating is driven by the market risk exposure of the underlying portfolio, which may not necessarily be reflected in the fund's NAV. The fund has low exposure to interest rate risk and spread risk, as reflected by a short maturity profile, with the result that the market risk factor (i.e. a risk-adjusted duration measure) for the fund is also low, consistent with a 'V1'(zaf) National Fund Volatility Rating. As per regulation, the fund's weighted average duration (i.e. factoring in next interest rate reset date) is capped at 90 days and weighted average life (i.e. based on portfolio securities' final maturity dates) at 120 days and no investment may have a maturity of greater than 396 days. FUND PROFILE: The fund is regulated by South Africa's Financial Services Board under the Collective Investment Schemes Control Act of 2002 (specifically Notice 80 of 2012). The fund invests in fixed- and floating-rate money market instruments including negotiable certificates of deposit, promissory notes and fixed deposits issued by the major South African banks. The size of the fund (combined with other money market funds managed by STANLIB) allows the fund to negotiate preferential rates and structures with issuers. As of end-February 2013, the fund had ZAR31bn in assets under management (AUM). Its sister funds, the Standard Bank Retail Money Market Fund (NR) and the Standard Bank Institutional Money Market Fund (NR) had ZAR35bn and ZAR18bn in AUM, respectively. THE ADVISOR: Fitch considers STANLIB suitably qualified, competent and capable of managing these funds. STANLIB is owned by Liberty (NR), which was around 54% owned by the Standard Bank Group ('BBB'/Stable/'F3', national short-term rating: 'F1+(zaf)') as of December 2012. STANLIB's AUM were around ZAR349bn as of end-December 2012, including ZAR111bn (around 32% of total AUM) in money market funds and segregated cash mandates. The fund is managed by Ansie van Rensburg, who has deep experience and tenure with STANLIB. The portfolio manager is part of STANLIB's fixed income investment team consisting of 11 investment professionals with average experience of around 15 years. Fitch views positively the depth of analysis and frequency of review in STANLIB's credit process. RATING SENSITIVITY: Funds in the 'AA(zaf)' National Fund Credit Rating category are considered to have very high underlying credit quality. The assets of the fund are expected to maintain a weighted-average portfolio rating of 'AA(zaf)'. Funds rated 'V1(zaf)' are considered to have low sensitivity to market risk. On a relative basis, total returns of funds rated 'V1(zaf)' are expected to exhibit high stability, performing consistently across a broad range of market scenarios. The National Fund Volatility Rating does not explicitly consider a fund's liquidity profile, nor does it address the sensitivity of a fund to extreme risks that may result from reduced liquidity in secondary markets during certain periods of time. Comparisons between different national fund rating scales or between an individual national and international scale are inappropriate. The ratings assigned to the fund may be sensitive to material changes in the credit quality or market risk profile of the fund. A material adverse deviation from Fitch's criteria for any key rating driver could cause ratings to be downgraded by Fitch. Specifically, Fitch would expect to downgrade the National Fund Credit Rating in the event of sustained deterioration in credit quality, closely related to the agency's credit opinion on the South African banking sector. Given the fund's short maturity profile, the National Fund Volatility Rating is expected to be stable. However, should interest rates or market volatility in South Africa structurally change then Fitch would expect to downgrade the National Fund Volatility Rating. RATING CRITERIA: Fitch rates MMFs in South Africa under its global bond fund rating criteria. This reflects the differences the agency perceives between South African MMFs and other Fitch-rated MMFs under its international and national MMF rating criteria. Specifically, the high level of concentration in these funds, a structural characteristic of the South African market, is inconsistent with Fitch's view of the risk profile of a MMF. The agency also notes regulatory differences between the US and European MMFs (subject to Rule 2a-7 in the US and ESMA guidelines for MMFs in Europe) and the regulatory regime in South Africa. Contacts: Primary Analyst Alastair Sewell Director +44 20 3530 1147 Fitch Ratings Limited 30 North Colonnade London E14 5GN Secondary Analyst Aymeric Poizot, CFA, CAIA Managing Director +33 1 44 29 92 76 Committee Chairperson Manuel Arrive, CFA Senior Director +33 1 44 29 9 1 77 Media Relations: Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: peter.this site Additional information is available at this site The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings. The sources of information used to assess this rating were the public domain and STANLIB. Applicable criteria 'Global Bond Fund Rating Criteria', dated 14 August 2012, is available at this site 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(zaf)' for National ratings in South Africa. Specific letter grades are not therefore internationally comparable. National Fund Volatility ratings are an opinion of the relative sensitivity of the total return, including market price, on a fund's shares to a broad array of assumed interest rates, rate of mortgage prepayment, liquidity of the portfolio, spreads, currency exchange rates, and other market conditions. Applicable Criteria and Related Research Global Bond Fund Rating Criteria here South African Banks: Peer Review here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. 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