Fitch Affirms CDG Capital Gestion's 'Highest Standards(mar)' Asset Manager Rating

Wed Jul 2, 2014 12:13pm EDT

(The following statement was released by the rating agency) PARIS, July 02 (Fitch) Fitch Ratings has affirmed CDG Capital Gestion's (CKG) National Asset Manager Rating at 'Highest Standards (mar)'. The Outlook is Stable. KEY RATING DRIVERS The rating reflects the high quality of CKG's risk management and control framework, which has been enhanced this year by a more developed credit analysis approach. The rating also reflects improvements in the operations workflows, (higher frequency of cash reconciliations, automation of brokers reconciliation), alongside the appointment of an experienced Head of Operations. The rating further takes into account CKG's long track record in serving institutional clients and solid market position in the Moroccan asset management industry, as well as the financial strength of its parent, CDG Group. CKG's main challenge is to continue efforts to diversify its client base (still concentrated in institutional group-related investors) by capitalising on its network partnerships (Credit Immobilier et Hotelier (CIH), and more recently Al Barid Bank (ABB)), as well as innovating and differentiating its products in the currently competitive environment. CKG's 'Highest Standards(mar)' rating is based on the following category scores: Company: Highest Controls: Highest Investments: Highest Operations: Highest (revised from High) Technology: Highest Asset manager operations in the 'Highest Standards(mar)' category demonstrate an investment platform and operational framework that Fitch considers superior relative to the standard applied by domestic institutional investors. Company: As the second-largest asset management company in Morocco, CKG benefits from a strong track record and market presence in the institutional space. CKG relies on its network partners, CIH, as well as ABB through which the distribution of two new funds targeted at corporate investors should start in 2H14. CKG is well staffed and comprises an independent Risk Manager (formerly Head of Operations) since 2012 and has appointed a new Head of Operations in 2014. Controls: The independent Risk Manager is fully dedicated to risk control since the recruitment of the Head of Operations in 2014. Since the creation of this independent risk unit in 2012, CKG had witnessed important developments in the elaboration and update of risk procedures and policies, such as those governing conflicts of interest, counterparty selection, and voting policies. Guidelines and limits are monitored in MANAR (a third-party central system for monitoring investment positions), with breaches reported through formal escalation procedures. Credit risk analysis has been improved, particularly in its internal scoring approach, all of which are embodied in a documented procedure. Investments: The investment processes primarily focus on domestic fixed income and equity markets, with a marginal coverage of international assets (allowed by regulator of up to 10% of a portfolio's total assets). The decision-making process is clearly structured and based on a consensual approach in committees. Credit analysis has been enhanced and its coverage extended over the past year. Every issuer is analysed quantitatively and qualitatively, leading to an overall internal score, which is presented in credit committees. The team comprises a dedicated analyst (credit and equity) and a dedicated equity trader. Operations: The team is well staffed with regard to volumes and instruments traded, and its new Head, benefitting from 12 years of experience, was recruited in the beginning of 2014. CKG's operational and valuation procedures are well documented and adequately controlled. The central position-keeping and operations tool, MANAR, adequately meets operational requirements and is regularly upgraded with new modules and functionalities. Fitch highlights the increase in cash reconciliation frequency (now daily), as well as the automation of broker reconciliations. These developments in 2013 put CKG in the best practice in this area, resulting in the improvement of this category's score. Technology: IT projects and developments are delegated to CDG Capital. CKG has also deployed a member of staff on a full-time basis to be close and responsive to specific needs. MANAR is the company's core system for portfolio position keeping, trade life cycle management, controls of investment constraints and back-office activities. The system adequately meets the needs and coverage of CKG. Incorporated in 1997, CKG 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-June 2014, CKG was the second-largest Moroccan asset manager with MAD46.4bn assets under management (around EUR4.1bn). CKG serves group subsidiaries, large institutional investors such as pension funds, banks, foundations and insurance companies, as well as corporates. Its assets are concentrated on fixed income (90%), in line with the overall local market, with the remainder being equity and balanced portfolios. RATING SENSITIVITIES The rating may be sensitive to material adverse changes to any of the rating drivers, notably through weakened financial conditions, heightened staff turnover or deterioration of processes and policies. A material adverse deviation from Fitch's guidelines for any key rating driver could cause the rating to be downgraded. Contact: Primary Analyst Francois Vattement, CFA Associate Director +33 1 44 29 92 75 Fitch France S.A.S. 60 rue de Monceau Paris 75008 Secondary Analyst Manuel Arrive, CFA Senior Director +33 1 44 29 91 77 Committee Chairperson Ian Rasmussen Senior Director +1 212 908 0232 Media Relations: Elaine Bailey, London, Tel: +44 203 530 1153, Email: Elaine.Bailey@fitchratings.com. Additional information is available on www.fitchratings.com Applicable criteria, 'Asset Manager Rating Criteria', dated 6 May 2014, are available at www.fitchratings.com. Applicable Criteria and Related Research: Asset Manager Rating Criteria here Additional Disclosure Solicitation Status here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. 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