Press Release
VIS Reaffirms MQ Rating of AWT Investments Limited
Karachi, April 24, 2020: VIS Credit Rating Company (VIS) has reaffirmed Management Quality Rating (MQR) of AWT Investments Limited (AWTIL) at ‘AM3+’ (AM Three Plus). The rating signifies asset manager exhibiting good management characteristics. Outlook on the assigned ratings is ‘Stable’. The previous rating action was announced on January 18, 2019.
Reaffirmation of ratings takes into account sound profile of the sponsor, recovery in mutual fund and advisory Assets under Management (AUMs), improvement in fund performance and AUMs profile and strengthening in management team. Ratings are constrained by very low market share, limited product portfolio suite, continuation of operational losses and erosion in equity base.
Sponsor of the company, Army Welfare Trust (AWT), has more than 4 decades of experience in the financial services sector, operating companies under the “Askari” brand. The assigned ratings incorporate demonstrated support of sponsor as indicated by equity injection of Rs. 100m in FY19 and another injection of Rs. 100m in January 2020 in the form subordinated loan to ensure compliance of AWTIL with Minimum Equity Requirement (MER) for Asset Management and Investment Advisory Companies.
Mutual fund AUMs of the company declined to Rs. 1.8b (FY18: Rs. 2.2b) at end-FY19 due to redemptions by a major institutional client. However, recovery was witnessed subsequently as the AUMs increased to Rs. 2.7b by end-December 2019. The company has managed to sustain its market share; however, the market share is considered low vis-à-vis peers. AUM profile has improved with increase in proportion of retail AUMs and reduction in investor concentration levels. However, investor concentration still remains on the higher side, thereby subjecting the company to redemption risk. During the period under review, performance of all the funds, barring Islamic income fund, has depicted improvement vis-à-vis peers. Sustaining fund performance is considered important from ratings perspective.
Sizeable growth has been observed in investment advisory business (SMAs), which has provided support to core income of the company. Although profitability has improved in HY20 vis-à-vis the corresponding period last year on the back growth in AUMs and SMAs, the losses continue to persist, which contribute to erosion in equity base. Overall governance framework is considered satisfactory in the backdrop of induction of seasoned professional management team, adequate risk management practices and formalized investment process. Control framework is supported by audit, compliance and IT infrastructure. With growth in SMAs, control framework will be tested over time.
For further information on this rating announcement, please contact the undersigned (Ext: 306) or Mr. Narendar Shankar Lal (Ext: 203) at 021-35311861-70 or fax to 021-35311873 or email at info@vis.com.pk.
Faryal Ahmad Faheem
Deputy CEO
Applicable Rating Criteria: Asset Management Companies (June 2019)
http://vis.com.pk/kc-meth.aspx