Fitch Upgrades Mirae Asset Solomon MMF to 'AA+(twn)'
KEY RATING DRIVERS
The upgrade of the National Fund Credit Quality Rating is driven mainly by the reduction in issuer concentration and stabilisation of the fund flows. The 'AA+(twn)' rating reflects the fund's high credit quality, as reflected in a weighted-average rating factor (WARF) of 0.4 at end-September 2015 and rating distribution ranging from 'BBB+(twn)' to 'AAA(twn)'.
The affirmation of the National Fund Volatility Rating is driven by low exposure to interest-rate risk and spread risk, as reflected in the short maturity profile.
ASSET CREDIT QUALITY
The portfolio had 86% of its assets rated in the 'A(twn)' to 'AAA(twn)' range as of end-September 2015; 16% of exposure was on Negative Outlook or Rating Watch Negative. Fitch considers that a downgrade of these particular exposures is unlikely to substantially alter the portfolio's credit quality, all else being equal, given that most of the exposure is related to highly rated issuers or counterparties.
The fund has a high concentration in the Taiwanese banking and finance sector, where our credit outlook is broadly stable. The top five issuers represent 42% of the fund's assets under management (AUM).
PORTFOLIO SENSITIVITY TO MARKET RISK
The fund has low exposure to interest-rate and spread risks, in light of the portfolio assets' short weighted-average maturity at 92 days at end-September 2015.
INVESTMENT ADVISOR
The fund is advised by Mirae Asset Global Investment (Taiwan) Co., Ltd (MAGI). The advisor is majority-owned (60.98%) by Mirae Asset Financial Group, a Korea-based asset management and securities firm with a presence in major countries.
Fitch considers the investment advisor suitably qualified, competent and capable of managing the fund. The investment team is experienced in implementing investment ideas.
FUND PROFILE
The fund invests in time deposits, certificates of deposit, commercial paper, repos or short-term bonds. The fund may engage in repurchase agreements backed by government-issued securities with collateralisation below 100%, which is in line with local market practice. It is a small money market fund in Taiwan, with TWD4.5bn of assets at end-September 2015 (equivalent to 0.5% of the domestic listed money market fund assets).
RATING SENSITIVITY AND SURVEILLANCE
The ratings may be sensitive to major changes in the credit quality or market risk profile of the fund. A significant adverse deviation from Fitch's guidelines for any key rating driver could cause a ratings downgrade. Specifically, Fitch would expect to downgrade the National Fund Credit Quality Rating in the event of deteriorating credit quality and/or substantial changes to the fund's investment practices to allow a larger portion of lower-rated assets. This is especially so because of a substantial share of its assets - the largest among Fitch-rated peers - are rated 'BBB+(twn)' as of end-September 2015. The fund's rating would be particularly sensitive to deterioration in the credit quality of the Taiwanese banking sector, given its large structural exposure to that sector.
Fitch expects the National Fund Volatility Rating to remain stable, given the fairly short maturity profile of the fund. However, Fitch would expect to downgrade the National Fund Volatility Rating should interest rates or market volatility in Taiwan structurally change, or the maturity profile of the fund be significantly extended.
To maintain bond fund ratings, MAGI, the manager of the fund, provides Fitch with monthly information, including details of the portfolios' holdings, credit quality and transactions. Fitch monitors the credit composition of the portfolios, the credit counterparties used by the manager and the overall market risk profile of the investments.
For additional information about Fitch rating criteria applicable to bond funds, see the criteria referenced below at www.fitchratings.com.
Comparisons between different national fund rating scales or between an individual national and international scale are inappropriate.
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