Karachi, December 31, 2019 (PPI-OT): VIS Credit Rating Company Ltd. (VIS) has maintained the Management Quality Rating of JS Investments Limited (JSIL) at ‘AM2’ (AM-Two). Outlook on the assigned rating is ‘Stable’. The previous rating action was announced on December 31, 2018.
The assigned rating takes into account JSIL’s position as a small but growing player in the asset management industry with a market share of around 3.4% (Sep’18: 2.9%) at end-Sep’2019. Ratings also reflect sound corporate governance framework, satisfactory control infrastructure and adequate investment decision making process. Money market funds and most fixed-term investment plans, making up majority of AMC’s assets under management (AUM), exhibited strong performance. However, equity funds which are relatively smaller portion recorded weak performance, and are a constraint on the ratings. Clearance of KYC and AML backlog in line with regulatory stipulation would be an important rating determinant.
JSIL product suite spans a wide range of investment opportunities – equity, fixed income, money market, balanced, fixed-term investment plans, fund of fund (FoF) and voluntary pension schemes (VPS) to meet various investment objectives depending on client’s risk appetite. Product portfolio is expected to be diversified beyond conventional funds with the launch of certain alternative products in addition to already launched Private Equity and Venture Capital Fund. Moreover, broadening of existing fund offerings is also planned through launch of government securities fund, fund of fund plans and consolidation of similar equity funds.
During FY19, growth in AUMs was concentrated towards fixed income funds given the prevalent interest rate environment and a sizeable AUM generation in fixed-term investment plans emanating from JS Bank. JSIL’s AUM profile is adequate with growth in proportion of retail AUMs although concentration in most funds under management remains on the higher side. Management plans to continue operating on a lean sales structure with utilization of technology in order to improve efficiency and enhancing customer service quality. Sales strategy focuses on leveraging branch network of JS Bank and digital platforms to increase market position, customer base and broad-based AUM growth. Successful execution of planned strategy and achieving projected targets would be important rating determinants.
With growth in AUMs concentrated towards money market funds, management fee generated remained around prior year level during 9MCY19. This along with higher administrative and selling expenses (primarily to improve market position and implications of IFRS 16) and significant unrealized loss on revaluation of investments (due to IFRS 9 and equity market conditions) translated into higher operating and net loss during 9MCY19. Arresting trend in operating losses is considered important from a ratings perspective.
For more information, contact:
Director Compliance and Rating Analytics,
VIS Credit Rating Company Limited
VIS House, 128/C, 25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi, Pakistan
Category: General Business News