Fitch assigns first fund rating in Sri Lanka

Fitch Ratings has assigned today the first fund rating in Sri Lanka, and rated the Ceylon Income Fund at ‘A-(lka)’ National Fund Credit Rating.

The fund primarily invests in corporate debt instruments and is managed by Ceylon Asset Management (CAM).

“The ‘A-(lka)’ National Fund Credit Rating is driven by the fund’s weighted average rating factor (WARF) and rating distribution while reflecting Fitch’s opinion that the fund is moderately concentrated,” Fitch said.

Fitch has rated the fund on the basis of its understanding that the majority of investors in the fund are not exposed to mark-to-market risk.

Instead, the agency understands that the vast majority of investors are duration matched, i.e. investors enter the fund with a specified maturity which is matched to the maturity of securities in the fund.

The portfolio is exposed to Sri Lanka corporate debt instruments, bank deposits and securities issued or guaranteed by banks and government securities.

“The fund’s WARF is consistent with a National Fund Credit Rating in the ‘A(lka)’ National Fund Rating category,” Fitch said.

The negative modifier in the fund’s ‘A-(lka)’ National Fund Credit Rating reflects Fitch’s view that the fund is moderately concentrated with a top-five issuer concentration of around 75% of the portfolio.

Fitch’s review of historic portfolio holdings indicates that the fund’s credit quality has improved year to date and Fitch expects the fund’s weighted average credit quality to remain stable, supported by the fund’s investment guidelines which limit it to investments in investment-grade rated issuers only.

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