Global Credit Ratings (GCR) accorded national scale fund ratings of AA+(ZA)(f) to the STANLIB Corporate Money Market Fund, and a rating of AA-(ZA)(f) to the STANLIB Extra Income Fund. Both ratings were accorded Stable outlooks.
Both funds have fixed income mandates which prioritise capital preservation, low risk and high liquidity, although they exhibit different investment mandates and preferences, while targeting different investor bases. The funds’ investment portfolios are managed within the Fixed Income franchise of STANLIB Limited, which is wholly-owned by the Standard Bank Group (through Liberty Group). According to GCR, based on track records, the funds have consistently met performance objectives, exceeding 12 month rolling return benchmarks within mandate constraints. Furthermore, the funds’ marketing, operations, risk management, compliance and administration processes follow market best practice.
The according of the AA+(ZA)(f) rating to STANLIB Corporate Money Market Fund was driven by its high credit quality, as reflected by its weighted average credit rating (WACR), and very low volatility and market risk given its short maturity/duration profile and targeted constant net asset value. The AA-(ZA)(f) rating accorded to STANLIB Extra Income Fund indicates its high credit quality (as reflected in its WACR), as well as its low interest rate/spread risk. GCR notes, however, that credit and market risk are higher in the Extra Income Fund than the Corporate Money Market Fund, given its higher exposure to longer dated debt securities.
GCR indicated that the funds’ ratings take cognisance of credit concentration, a systemic issue in South Africa affecting most or all variable rate, money-market type fixed income funds. That said, the portfolio of STANLIB’s Extra Income Fund is significantly less concentrated than that of its Corporate Money Market Fund. Stability or improvement in concentration risks could help to enhance the ratings of the funds, while any breaches, and/or deterioration in credit, liquidity or concentration risks, could negatively affect their ratings.