August 21, 2014 / 4:16 PM / in 3 years

Fitch Affirms Nedgroup Investments Money Market Fund at 'AA+(zaf)'; off RWN

(The following statement was released by the rating agency) LONDON, August 21 (Fitch) Fitch Ratings has affirmed Nedgroup Investments Money Market Fund's National Fund Credit Rating at 'AA+(zaf)' and removed the fund from Rating Watch Negative (RWN). The National Fund Volatility Rating of 'V1(zaf)' has also been affirmed. KEY RATING DRIVERS The removal of the RWN follows the removal of the fund's exposure to the financially troubled African Bank on 18 August 2014. The removal of the exposure has eliminated uncertainty from the fund resulting from African Bank's evolving credit profile. The fund has confirmed that it followed applicable regulatory guidance when writing down the value of African Bank senior debt by 10%, as required, on 11 August 2014, which was absorbed through accrued income. The fund has confirmed that its capital was not affected by the writedown. The fund's current weighted-average credit quality (as measured by its Weighted Average Rating Factor or WARF) is consistent with a 'AAA(zaf)' National Fund Credit Rating, following the removal of the African Bank exposure. However, Fitch has not upgraded the fund to 'AAA(zaf)' as the agency considers the fund concentrated per its rating criteria. Fitch may assign a lower rating than the WARF-implied level to funds it deems concentrated (as measured by top one, three and five issuer concentrations). This approach is consistent with Fitch's approach to rating other comparable funds in South Africa. The fund's prospective credit quality is high, consistent with a 'AA+(zaf)' National Fund Credit Rating (after incorporating an adjustment for concentration risk.) The fund has a combined exposure of around 80% to the five largest banks in South Africa, as of 18 August 2014. As of 18 August 2014 the fund had assets with overnight and seven-day maturities of 5% and 12% respectively, which is broadly comparable with the average observed in South African money market funds. RATING SENSITIVITIES Fitch will continue to monitor the fund closely, notably the magnitude of any outflows from the fund. Material sudden or sustained outflows could lead Fitch to place the fund back on RWN or downgrade the fund. RATING CRITERIA Fitch rates MMFs in South Africa under its global bond fund rating criteria. This reflects the differences the agency perceives between South African MMFs and other Fitch-rated MMFs under its international and national MMF rating criteria. Specifically, the high level of concentration in these funds, a structural characteristic of the South African market, is inconsistent with Fitch's view of the risk profile of a MMF. As a result of this concentration risk South African MMFs are typically unable to achieve a 'AAA(zaf)' National Fund Credit Rating. There are also regulatory differences between US and European MMFs (subject to Rule 2a-7 in the US and ESMA guidelines for MMFs in Europe) and the regulatory regime in South Africa. Contact: Primary Analyst Alastair Sewell Senior Director +44 20 3530 1147 Fitch Ratings Limited 30 North Colonnade London E14 5GN Secondary Analyst Richard Woodrow, CFA Associate Director +44 20 3530 1388 Committee Chairperson Davie Rodriguez, CFA Senior Director +1 212 908 0386 Media Relations: Elaine Bailey, London, Tel: +44 203 530 1153, Email: elaine.bailey@fitchratings.com. Additional information is available at www.fitchratings.com. The sources of information used to assess this rating were the public domain, Nedgroup Investments and Taquanta Asset Managers. Applicable criteria 'Global Bond Fund Rating Criteria', dated 13 August 2013, are available at www.fitchratings.com. Applicable Criteria and Related Research: Global Bond Fund Rating Criteria here Asset Management in South Africa - Multi-Asset Funds Driving Industry Growth 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'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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