OREANDA-NEWS. Fitch Ratings has affirmed the Royal London Cash Plus Fund's Fund Credit Quality Rating at 'AAA' and Fund Volatility Rating at 'V1'. The fund is managed by Royal London Asset Management Ltd (RLAM) and is a sub-fund of the UK domiciled OEIC, Royal London Bond Funds ICVC.

KEY RATING DRIVERS
The affirmation of the Fund Credit Quality Rating reflects the distribution of ratings, the credit quality, and the fairly short-term maturity of the portfolio, which are consistent with a 'AAA' Fund Credit Quality Rating.

The affirmation of the 'V1' Fund Volatility Rating reflects the fund's relatively low sensitivity to market risk factors such as interest rate and spread risks.

ASSET CREDIT QUALITY
The fund's weighted average credit quality is high as indicated by its weighted average rating factor, which was 0.40 at end-May 2015, the upper limit of the 'AAA' Fund Credit Quality range in Fitch's rating criteria (0 to 0.40). The fund's investment guidelines allow a minimum credit quality of 'F1' or equivalent for cash instruments, UK government securities and supranational issuers with a minimum 'AA' rating, and corporate bonds with a minimum 'AA-' rating. The fund also invests in covered bonds, typically of at least 'AA' credit quality.

PORTFOLIO SENSITIVITES TO MARKET RISKS
The fund has a moderately low exposure to market risk factors such as interest rate and spread risks. As of end-May 2015, the fund's weighted average maturity was 138 days (interest rate duration of around 0.4 years) and the weighted average life was 410 days. Interest rate risk is managed with a duration limited to three years, although duration has been stable at around 0.4 years over the past 12 months. The fund does not use leverage or take foreign currency exposures.

FUND PROFILE
The fund is domiciled in the UK and is regulated by the UK's Financial Conduct Authority and is UCITS compliant. The fund's performance objective is to seek to achieve +0.50% to +0.75% per annum gross of fees above 7 day LIBID over a rolling 12-month period. As of end-May 2015, the fund's total assets stood at GBP1.1bn.

THE ADVISOR
RLAM was established in 1988 and is part of the Royal London Group, a mutual society. Royal London is the UK's largest mutual life and pensions company. As of end-March 2015, RLAM managed a total of around GBP86.3bn in assets, of which GBP42.3bn were in fixed income assets and GBP7.9bn in cash assets.

RATING SENSITIVITIES
The ratings may be sensitive to material changes in the fund's credit quality or market risk profile. A material adverse deviation from Fitch guidelines for any key rating driver could cause Fitch to downgrade the ratings. For example, if credit deterioration occurs such that the weighted average rating factor (WARF) increases beyond criteria levels for a 'AAA' Fund Credit Quality Rating, the rating may be downgraded. The fund is particularly sensitive to credit deterioration given the current WARF is at the upper end of the range for a 'AAA' Fund Credit Quality Rating. Potential downgrades to the Fund Volatility Rating are limited in scope, given the fund's low sensitivity to interest rate and spread risks.

To maintain the ratings, the administrator of the fund, HSBC, provides Fitch with monthly information, including a detailed portfolio holdings report. Fitch closely monitors the credit composition of the portfolio and the overall market risk profile of the investments.