OREANDA-NEWS. Fitch Ratings has affirmed Valoris Management's 'High Standards(mar)' National Asset Manager Rating. The Outlook is Stable.

KEY RATING DRIVERS
The rating recognises Valoris Management's disciplined portfolio management process, which has gained in research resources and depth, its solid compliance and control framework, and an integrated technological platform covering front- to back-office functions. The rating also reflects the company's well-established position with Moroccan institutional investors and financial institutions.

Main challenges facing the company are further diversifying its investor base and developing its footprint outside of the institutional segment, enhancing the scalability of operational workflows as the number of portfolios grows and developing investment risk management practices.

Valoris Management's 'High Standards(mar)' rating is based on the following category scores:
Company: Good
Controls: High
Investments: Highest (revised from High)
Operations: High
Technology: High

Asset manager operations in the 'High Standards (mar)' category demonstrate an investment platform and operational framework that Fitch considers strong relative to the standards applied by domestic institutional investors.

Company
Valoris Management is an entrepreneurial Moroccan asset management company owned by its two co-founding partners and, to a lesser extent, by other senior executives of the company. Growth in its assets under management (AUM) has allowed the company to keep up with industry developments and to maintain its position as the sixth largest Moroccan asset manager by AUM, and the first non-bank or -insurance affiliate. It is well-established with local institutional investors and banking groups and plans to grow in the corporate and high-net-worth segments. Valoris Management's solid profitability nevertheless remains sensitive to the concentration of its investor base.

Teams are appropriately sized given the number and complexity of the funds managed. Valoris Management's governance is appropriate and supports alignment of interests with investors. Capital Gestion Group, the asset manager's parent, is developing corporate finance, including bond origination, and brokerage activities. Potential conflicts of interests that may result from these activities are addressed through a Chinese wall policy and oversight by the group's compliance officer.

Controls
The control framework allows solid coverage of risk areas. It benefits from strong oversight from the compliance and control officer, independently of the investment and operational teams, complemented by the company's risk committee. Recently-updated procedures and documented controls further support the effectiveness of the operational and control environment. Pre- and post-trade controls on compliance with investment guidelines and trading rules are automatically performed by the central position-keeping tool. Internal control achieved ISAE 3402 type I certification in 2015. Investment risk management primarily rests with the portfolio management team.

Investments
Valoris Management's investment processes focus on domestic financial markets for the management of fixed-income, money market, equity and balanced markets portfolios. Portfolio management follows a disciplined committee-driven approach, combining top-down and bottom-up inputs. The addition of a chief economist position, together with refined quantitative tools, has contributed to more in-depth and focused research and decision-making. Credit selection has to comply with a list of eligible issuers set by the company's risk committee.

Operations
Middle- and back-office teams are adequately staffed given volumes and instruments used and following a more efficient use of electronic filing and approval. Operational and valuation procedures have been updated; they are adequately controlled and robustly supported by Manar, a local vendor application. Order-matching with brokers and counterparties is a largely manual process. Similarly, reconciliations with custodians are manually performed daily on cash and monthly on securities. Work is in progress for the automation of subscription/redemption information flow via Maroclear.

Technology
Manar is the central tool for position-keeping, order management, controls on investment compliance and middle- and back-office activities. It provides comprehensive and integrated coverage of the company's needs. Regularly tested, the business continuity plan includes a back-up server that is physically updated weekly and a recovery site.

Valoris Management is the asset management arm of Capital Gestion Group for open-ended funds. At end-June 2015, Valoris Management was managing MAD21.6bn (EUR2bn) worth of assets. In line with the overall local market, most of these assets are concentrated in domestic fixed income and money market assets (95%). The company employs seven investment professionals, four middle- and back-officers and one compliance and control officer. Some activities such as commercial, IT, administrative and financial functions are outsourced to Capital Gestion Group as part of resource mutualisation within the group.

RATING SENSITIVITIES
The rating may be sensitive to material adverse changes to any of the aforementioned rating drivers, notably through weakened financial conditions, material operational loss, heightened staff turnover or deterioration of processes and policies. A material adverse deviation from Fitch guidelines for any key rating driver could cause the rating to be downgraded. Conversely, significantly improved investor diversification and the development of investment risk management could lead to a rating upgrade.