Karachi, December 31, 2020 (PPI-OT):VIS Credit Rating Company Ltd. (VIS) has assigned initial Management Quality Rating of ‘AM1’ (AM-One) to National Investment Trust Limited (NIT). Outlook on the assigned rating is ‘Stable’
Assigned rating reflects NIT’s strong niche position of being a Government sponsored AMC with demonstrated support as also being a seasoned AMC with a sound performance track. The ratings take into consideration its asset-management franchise, existing market position as one of the leading AMCs in the country, adequate governance and control framework, sound investment administration and a well-defined investment process which has translated into competitive fund returns particularly for the largest funds under management.
Rating also incorporates NIT’s robust financial profile (strongest amongst peers) and the financial strength of its major shareholders, i.e. government and large commercial banks. Rating remains dependent on enhancing market position, augmenting retail penetration and reducing concentration in investor base along with diversifying AUM mix and strengthening of marketing and sales infrastructure along with stability in the senior management team.
NIT is one of the leading players in mutual fund industry with a market share of ~10% in terms of AUMs as at end-Sept’20. However, market position has weakened over time due to faster market growth in fixed income funds, weak stock market performance in the last few years and stricter investment limits for equity in contributory funds. In line with the industry trends the investor concentration is on the higher side while proportion of retail AUMs is moderate and needs improvement. Equity based funds represent the majority of AUMs being managed by the AMC although penetration in fixed income funds has improved in recent periods.
NIT has a nationwide presence through an extensive branch network of 27 branches. With the size of the sales team being smaller vis-à-vis peers, management is focusing on enhancing efficiency of existing resources. Over the last 18 months, management has strengthened the technology framework which includes launch of mobile app and other digital initiatives. Translation of these initiatives along with further strengthening of sales infrastructure for improvement in market position and AUM profile is considered important. Rating also incorporates strong focus on product development where a number of innovative product schemes are in the pipeline.
NIT’s current fund slate in terms of product offerings caters to basic investor needs. Flagship product of the AMC – National Investment Unit Trust (NIUT) which is currently the largest equity fund in the market constituting one-fourth of industry’s overall equity funds exhibited strong performance (in terms of returns); ranked 2nd out of a peer group of 21 conventional equity funds. The fund has also outperformed the benchmark over a longer time horizon. Relative ranking of fixed income funds has improved but overall performance of fixed income funds has room for improvement.
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