Karachi: The Pakistan Credit Rating Agency Limited (PACRA) has reaffirmed the stability rating of the JS Islamic Daily Dividend Fund (JSIDDF) at ‘AA(f)’ with a stable outlook as of October 22, 2024. This endorsement reflects the fund’s consistent performance and strong adherence to its Shariah-compliant investment mandate, aimed at ensuring liquidity and daily dividends for its investors.
According to The Pakistan Credit Rating Agency Limited, JSIDDF maintains a low-risk profile through a prudent investment strategy focused on Shariah-compliant money market instruments. As of the end of June 2024, the fund had allocated its assets across various secure avenues: approximately 43.31% in cash in banks, 31.61% in Sukuks, 21.39% in GOP/Ijara Sukuks, and the remainder in other investments.
The diverse yet conservative allocation strategy has bolstered the fund’s credit quality, with 31.14% of its portfolio in A+ rated avenues, 24.67% in AA, 21.39% in AAA, 10.76% in AA-, and 8.33% in AA+ rated avenues. This spread demonstrates a balanced approach, prioritizing both security and return within the constraints of Shariah-compliant investing.
The fund’s considerable holdings in cash and bank balances enhance its liquidity profile, a critical factor for a fund that promises daily dividends to its investors. The Weighted Average Maturity (WAM) of the fund stood at 85 days as of June 2024, effectively limiting the fund’s exposure to credit risk. Similarly, the duration of the fund at 75 days mitigates its sensitivity to interest rate fluctuations, further stabilizing its investment returns.
However, the fund faces high redemption pressure, with the top ten investors accounting for approximately 65.37% of its assets as of June 2024. This concentration poses potential liquidity challenges, which the fund addresses through robust management of its asset and liability durations.
Looking ahead, PACRA notes that any significant changes in the fund’s investment policy or adjustments in the devised rating criteria could influence future stability ratings. As it stands, the JS Islamic Daily Dividend Fund continues to offer a reliable option for investors seeking Shariah-compliant daily income solutions, with a strong emphasis on liquidity and capital preservation.