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Global Credit Ratings affirms ratings of three Investec funds

24 March 2017 Investec Asset Management

Global Credit Ratings (GCR) has affirmed the national scale fund ratings of AA+(ZA)(f) accorded to both the Investec Money Market Fund and the Investec Corporate Money Market Fund. Both money market fund ratings have Stable outlooks.

“In determining its fund ratings, GCR qualitatively assessed the funds’ management, and performed an evaluation of the fund portfolios’ historical performances in terms of price and return volatility, underlying asset quality, and market and liquidity risks,” says Omega Collocott, Head of Financial Institutions Ratings at GCR.

“The money market funds exhibit varied conservative investment mandates which cater to the preferences and profiles of different investor bases. Nonetheless, both funds have high income, capital presentation mandates, and invest in low-risk and highly liquid fixed income portfolios,” she adds.

Investec Asset Management, the funds’ manager, represents a very strong fund management and control environment, supporting the ratings. This is underscored by the funds’ performance track records, which indicate that the money market funds have consistently outperformed their 12 month rolling performance benchmarks, while fulfilling their investment objectives and remaining within their mandates and investment guidelines. Furthermore, the manager’s marketing, risk management, compliance and administration follow international best practice.

The according of the AA+(ZA)(f) rating to the two money market funds was driven by the high credit quality of their portfolios as reflected by their stress-tested weighted average credit ratings (WACRs), and very low volatility and market risk given their short maturity and duration profiles.

GCR has also affirmed the rating of AA(ZA)(f) with a Stable outlook accorded to the Investec STeFI Plus Fund, also managed by Investec Asset Management. The AA(ZA)(f) rating accorded to the STeFI Plus Fund indicates its high credit quality (as reflected in its stress-tested WACR), as well as moderately low volatility and market risk. GCR notes that interest rate risk and volatility are higher in the STeFI Plus Fund than the money market funds, primarily as a result of its more flexible mandate, and exposure to longer tenor securities.

GCR noted that the funds’ ratings consider credit concentration, which is a systemic issue in South Africa, and affects most variable rate, short-term fixed income funds (ie, MM funds and other cash strategies), due to the typically high allocation of bank securities in these funds’ portfolios.

“The ratings of all three funds would be enhanced by increases in their WACRs, together with stability or improvement in concentration risks. Conversely, persistent mandate breaches, and/or significant deterioration in credit, liquidity and/or market risk metrics, could negatively affect the funds’ ratings,” Collocott concludes.

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