GCR Upgrades AIICO Money Market Fund’s Outlook to Positive
GCR Ratings has affirmed AIICO Money Market Fund’s national scale fund rating of A+(NG)(f) with the outlook revised to positive from stable. AIICO Money Market Fund, an open-ended collective investment scheme, is actively managed by AIICO Capital Limited.
According to the rating note, the fund provides an investment opportunity for individuals and corporate clients. The fund affords invest in a diversified selection of money market instruments, including Federal Government of Nigeria (FGN) treasury bills, certificates of deposit, commercial papers, and other liquid assets.
As of July 31, 2024, the fund’s Assets under Management (AUM) stood at N6.9 billion, or USD4.1 million, representing a 91.6% increase from N3.6 billion in August 2023, the rating note stated.
GCR said as of 31 July 2024, the fund’s weighted average credit quality improved to 8.75 from 7.50 in August 2023 on the back of increased stock of FGN treasury bills which accounted for 42.3% of the portfolio at that date from 26.7% as at August 2023.
“We note that the proportion of risk-free sovereign debt instruments in the portfolio has varied over the last 3 years, and that the recent increase in the proportion is mainly due to high yield on sovereign debt securities.
“The outlook therefore depends on the direction of sovereign debt yields and related investment allocations. The fund’s assets also comprise placements with investment grade-rated financial institutions and commercial paper”, GCR said.
The rating note revealed that the fund’s mandate is flexible, allowing the manager to invest in a wide range of assets provided they are of investment grade. Hence, there is potential for variations in the fund’s credit quality over the next 12 to 18 months.
GCR stated that AIICO MMF’s maturity and duration are positive to the rating. As of 31 July 2024, the weighted average maturity of the fund was 69 days with a similar estimated weighted average duration (WAD). Consequently, the assessment of WAM and WAD translated to an average score of 1.25 in line with the previous year, the rating note said.
GCR analysts said they do not expect a considerable change in the maturity profile of the fund above 90 days, typical of money market funds.
For the rating, the sustainability assessment is neutral. The fund is managed by AIICO Capital, an experienced fund manager in Nigeria with a track record spanning over two decades.
The fund manager is known for providing a range of financial services such as financial advisory, asset management and investment banking to corporate and individual clients.
GCR said the fund’s investments are in line with the provisions of the trust deed, and there have been no regulatory breaches since the last review.
According to the rating note, the fund has consistently outperformed the benchmark, albeit with some deviations in the fund’s returns compared to the benchmark in certain months due to a sudden spike in the benchmark: the 91-day Nigerian Treasury bill rate.
Liquidity is also considered neutral to the rating. The fund is concentrated in short-dated securities with maturities ranging between 30-365 days, providing adequate liquidity buffers.
As of 31 July 2024, investor concentration was moderate, with the top 10 investors accounting for 33.6% – from 50.1% in August 2023- of total AUM. The ratings agency said it expects the liquidity profile to be sustained over the rating horizon.
GRC said the positive outlook reflects expectation that the fund’s weighted average credit quality will be maintained at the 8.25 to 8.75 range over the next 12–18 months.
Additionally, the ratings agency’s analysts expect the fund to sustain a short maturity profile with minimal interest rate risk and a well-managed liquidity profile. #GCR Upgrades AIICO Money Market Fund’s Outlook to Positive Equities Investors Wealth Rises as Nigerian Exchange Rally
