Karachi: The Pakistan Credit Rating Agency Limited (PACRA) has reaffirmed the stability rating of the Alfalah GHP Sovereign Fund at AA-(f) with a stable outlook, recognizing the fund’s robust investment in government securities and its strategic management of credit and interest rate risks.

According to The Pakistan Credit Rating Agency Limited, the Alfalah GHP Sovereign Fund has consistently maintained its low-risk profile by investing predominantly in government securities and other debt instruments. The fund aims to deliver optimal risk-adjusted returns by focusing on a mix of short to long-term government securities.

As of the end of June 2024, the fund’s assets were heavily concentrated in high-quality investments, with approximately 97.7% in AAA-rated avenues, 0.03% in AA-, and 2.0% in other rated assets. The investment breakdown included about 48.7% in Treasury Bills (T-Bills), 33.8% in Pakistan Investment Bonds (PIBs), 11.2% in bank placements, 0.4% in Term Finance Certificates (TFCs)/Sukuks, and 2% in other assets.

Despite a fund duration of 250 days and a Weighted Average Maturity (WAM) of 635 days at the end of June 2024, which exposes it to very high interest rate and credit risks, the fund’s heavy investment in government securities mitigates these risks. The credit risk remains at a manageable level due to the secure nature of these investments.

The fund’s unit holding pattern indicates that the top ten investors represent 61.06% of the holdings, suggesting a high level of redemption pressure. However, this risk is managed effectively due to the fund’s strong liquidity profile, ensuring that it can meet investor withdrawals without significant impact.

PACRA notes that any future changes in the fund’s investment policy or deviations from the compliance standards could influence its stability rating. The ongoing commitment to maintaining a conservative investment approach and high liquidity levels is crucial for sustaining the current rating.