Press Release
VIS Reaffirms Management Quality Rating of Alfalah Asset Management Limited
Karachi, January 02, 2025: VIS Credit Rating Company Limited (VIS) has reaffirmed the Management Quality Rating (MQR) of Alfalah Asset Limited (‘AAML’ or the ‘AMC’) at ‘AM1’ (AM One). The MQR of ‘AM1’ indicates that the asset manager exhibits excellent management characteristics. Outlook on the assigned ratings remains ‘Stable.’ Previous rating action was announced on December 29, 2023.
Headquartered in Karachi, AAML is jointly owned by MAB Investments Inc. and Bank Alfalah Limited (BAFL). MAB Investments operates under the patronage of H.H. Sheikh Nahayan bin Mubarak Al Nahayan, a distinguished member of the Abu Dhabi’s ruling family, as well as the chairman and a shareholder of BAFL. BAFL, a leading commercial bank with 'AAA' credit rating, has a network of over 900 branches across more than 200 cities in Pakistan and an international presence in Afghanistan, Bangladesh, Bahrain, and the UAE.
The assigned rating reflects AAML’s substantial growth in Assets Under Management (AUMs) outpacing the overall industry during the review period. This growth has been supported by initiatives targeting increase in both conventional and Islamic AUMs. While the AMC has maintained its position in the industry, some fluctuations in Islamic AUMs have slightly impacted its share in the Shariah-compliant segment. AAML expects continued growth through strategic initiatives aimed at expanding its market presence.
The rating is supported by AAML's strong corporate governance framework, with an experienced and diverse Board supported by several board-level committees. The AMC’s investment approach is anchored in strong governance and rigorous risk management framework. The Investment Committee (IC), comprising senior management members, oversees the development and implementation of portfolio strategies. This involves analyzing macroeconomic trends, such as inflation and interest rates, to facilitate informed decision-making. For equity funds, the team conducts sectoral reviews to optimize allocations and manage risk within the limits set by the Board. The IC meets regularly to evaluate portfolio performance, assess risks, and align decisions with the Board’s investment policy.
The rating takes into account positioning of AAML’s portfolio, which remains dominated by fixed-income funds, capitalizing on a favorable high-interest rate environment, while equity funds constitute a smaller share. A significant concentration of AUMs in a few top funds highlights an opportunity to enhance diversification and reduce reliance on individual products. Fund performance has experienced a decline over the review period, with fewer funds achieving top-tier quartile rankings compared to prior years, as returns from equity, money market, and income funds trailed industry peers. The AMC has experienced growth in its client base and has leveraged relationship with its major distributor, BAFL, to promote its mutual fund offerings. While the AMC’s strong market position, disciplined investment practices, and improving financial metrics support credit strength, addressing challenges in fund performance, retail participation, and client concentration will remain important for sustaining its competitive position and growth.
For further information on this ratings announcement, please contact at 021-35311861-64 or email at info@vis.com.pk.
Applicable Rating Criteria: Asset Management Companies
https://docs.vis.com.pk/Methodologies%202024/AMC-Methodology-201906.pdf
VIS Issue/Issuer Rating Scale
https://docs.vis.com.pk/docs/VISRatingScales.pdf