(Repeat for additional subscribers)
June 25 (The following statement was released by the rating agency)
Fitch Ratings has affirmed SWIP Sterling Investment Cash Fund's Fund Credit and Volatility Ratings at 'AAA'/'V1'. The fund is a sub-fund of Ireland-domiciled SWIP Investment Cash OEIC plc managed by Scottish Widows Investment Partnership (SWIP).
KEY RATING DRIVERS
The main drivers for the fund's credit rating affirmation are:
-- The high average credit quality of the fund's portfolio of assets
-- The distribution of asset ratings and investment guidelines limiting the minimum rating of assets and counterparties to 'A-'/'F1' (or equivalent)
-- Portfolio diversification
The main drivers for the fund's volatility rating affirmation are:
-- The fund's low exposure to interest rates with duration maintained below one year
-- Contained spread duration exposure
ASSET CREDIT QUALITY
The credit quality of assets, combined with the high issuer diversification within the portfolio, is consistent with Fitch's criteria for a 'AAA' Fund Credit Rating. The fund invests in a diversified portfolio of assets, typically comprising certificates of deposit, commercial papers, time deposits, fixed- and floating-rate government and corporate bonds, including covered bonds, and asset-backed securities (ABS). Underlying counterparties and securities must carry a minimum rating of 'A-'/'F1' (or equivalent) at time of purchase. At end-May 2014, the fund was invested in 58 issuers, of which 42% were rated 'AAA' and the minimum credit quality of assets was 'A'. ABS investments are in prime European - typically UK - RMBS and credit card ABS, which carry a minimum rating of 'AAA'.
The top five issuer exposures comprised 20% of the portfolio as of end-May 2014. Under the fund's investment guidelines, concentration per issuer or counterparty is limited to no more than 5% of the fund's net assets, unless the exposure is to government debt or overnight deposits, which may account for up to 10%.
PORTFOLIO SENSITIVITY TO MARKET RISKS
The fund's weighted-average maturity to reset (WAM) is maintained well below one year. Maturity of investments is limited to three and five years for fixed-rate and floating-rate instruments, respectively. At end-May, the fund had a WAM of 144 days and weighted average life (WAL) of 420 days with 52% of total assets maturing within one year. The fund has no foreign exchange exposure.
Liquidity and spread risk that may stem from ABS exposure is limited as the fund's allocation to such assets may not account for more than 15% of the portfolio's total assets (9.5% at end-May 2014).
SWIP, the fund's investment manager, is a wholly-owned subsidiary of Aberdeen Asset Management Ltd (Aberdeen, A/Stable/F1) since 1 April 2014, when the Lloyds Banking group sold its participation. SWIP operates as a subsidiary of Aberdeen with its own governance until the integration of the SWIP and Aberdeen businesses is defined and completed. Monitoring and control of sensitive activities have adequately been strengthened since January 2013. At end-March 2014, the combined SWIP and Aberdeen group was managing GBP324.5bn of assets globally, including 30% in money market and fixed-income assets.
SWIP Sterling Investment Cash Fund is a sub-fund of Ireland-domiciled SWIP Investment Cash OEIC plc, an umbrella-type open-ended investment company pursuant to the UCITS regulation. As of end-May 2014, the fund's total assets stood at GBP3.3bn.
The ratings may be sensitive to material changes in the credit quality or market risk profiles of the fund. A material adverse deviation from Fitch's guidelines for any key rating driver could cause the ratings to be downgraded. For additional information about Fitch's bond fund ratings guidelines, see the criteria referenced below.
To maintain the fund's ratings, Fitch receives monthly fund and portfolio holdings information from the fund's administrator, State Street Fund Services (Ireland) Limited, and conducts surveillance checks against its ratings criteria.