OREANDA-NEWS. Fitch Ratings has affirmed CDG Serenite's 'AAAmmf(mar)' National Money Market Fund Rating. The fund is domiciled in Morocco and managed by CDG Capital Gestion.

KEY RATING DRIVERS
The main drivers of the rating are:
-- The portfolio's high overall credit quality
-- Short portfolio maturity with minimal exposure to interest rate and spread risks
-- High levels of portfolio liquidity, well in excess of Fitch's criteria guidelines, reflecting the high investor concentration in the fund's inception phase
-- The capabilities and resources of CDG Capital Gestion as investment manager

Fitch considers that the small size of the fund (MAD11.6m as at 19 February 2016, ie. around EUR1m) and investor concentration are key rating sensitivities. The agency understands that CDG Capital Gestion has started to actively re-market the fund and expects to raise substantial assets in the short term. Fitch will closely monitor developments in the fund.

PORTFOLIO CREDIT QUALITY/DIVERSIFICATION
The fund seeks to maintain a high credit quality by investing exclusively in securities issued by the Kingdom of Morocco (BBB-/Stable) or high-quality and publicly-rated issuers or counterparties, and in repurchase agreements collateralised by government bonds, with adequate margining procedures and a sound legal framework.

The fund may use overnight or weekly callable overnight inter-fund repos with other funds managed by CDG Capital Gestion. These inter-fund transactions are collateralised by Moroccan government securities, and an appropriate level of overcollateralisation should the collateral's residual maturity exceed that of instruments eligible for direct investment. However, Fitch notes that on 29 January 2016, two inter-fund repos were collateralised by bank certificates of deposits. The situation was remedied as at 19 February 2016.

The fund controls concentration risk by setting adequate limits on its exposures to individual issuers (10%) and repo counterparties (20%).

The credit quality of invested issuers and level of diversification is consistent with Fitch's 'National Scale Money Market Fund Rating Criteria' guidelines at the 'AAAmmf(mar)' rating level.

MATURITY PROFILES
The fund's maturity profile is maintained in line with Fitch's 'AAAmmf' national scale money market fund rating criteria. The fund also limits the maturity date of any single investment to 397 days other than sovereign or quasi-sovereign floating-rate notes, which may have maturities of up to 24 months. At 19 February 2016, the fund's weighted average maturity and weighted average life both stood at 50 days.

LIQUIDITY PROFILES
The fund's investment restrictions are aimed at maintaining strong levels of daily and weekly liquidity to meet investors' redemption requests, in line with Fitch's rating criteria for 'AAAmmf(mar)' funds. The current liquidity profile of the fund is high, reflecting its high investor concentration. The fund successfully met the large redemptions in January 2016 while continuing to operate within Fitch's 'AAAmmf(mar)' rating guidelines. As at 19 February, there were only two investors in the fund, the largest one representing 90%.

FUND OBJECTIVES
The objective of the fund is to provide capital stability, liquidity and income through investment in a portfolio of high credit quality money market instruments and short-term bonds.

INVESTMENT MANAGERS
CDG Capital Gestion, the fund's asset manager is rated 'Highest Standards(mar)'. Incorporated in 1997, CDG Capital Gestion is a subsidiary of CDG Capital, itself owned by CDG Group, a public institution and the largest institutional investor in Morocco, comprising a large portfolio of activities. At end-2015, CDG Capital Gestion was the second-largest Moroccan asset manager with MAD52bn assets under management (around EUR4.8bn). Its assets are concentrated on fixed income (90%), including 25% in money market products, in line with the overall local market.

Fitch views CDG Capital Gestion's investment management capabilities, operational controls, financial and resource commitments and compliance procedures as consistent with a 'AAAmmf(mar)' National Scale Money Market Fund rating.

RATING SENSITIVITIES
The rating may be sensitive to material changes in the credit quality or market risk profile of the fund. A material adverse deviation from Fitch guidelines for any key rating driver could cause Fitch to downgrade the rating. Specifically, the small size of the fund and investor concentration can result in difficulties to adhere to Fitch's 'AAAmmf(mar)' rating guidelines.

For instance, if the fund fails to meet diversification criteria, it will be downgraded to 'AAmmf(mar)'. If the fund's liquidity is impaired as a result of redemption from the current largest investor, it will be downgraded to 'BBmmf(mar)'. If the fund fails to preserve capital as a result of losses incurred to meet redemptions, it will be downgraded to 'Bmmf(mar)', consistent with the agency's applicable rating definitions. Lastly, were the fund to engage in interfund repos not backed by Kingdom of Morocco securities or its government agencies, then Fitch may downgrade the rating to a level consistent with the collateral quality of the repos in question.

Should the size of the fund contract to a negligible level then Fitch may choose to withdraw the rating due to it no longer being relevant to its coverage.

A downgrade of the sovereign's international Long-term Issuer Default Rating would not necessarily result in a downgrade of the fund's National Money Market Fund Rating as it could continue to represent the lowest credit, market and liquidity risk available in Morocco, in line with Fitch's national scale rating approach.

SURVEILLANCE
The agency monitors the portfolio composition and its compliance with rating criteria on the basis of reports and holdings sent on a weekly basis by CDG Capital Gestion's Risk Manager.