November 30, 2016 / 3:11 PM / a year ago

Fitch Affirms FCP Emergence Serenite Fund at 'AAA(mar)'/'S3(mar)'

(The following statement was released by the rating agency) PARIS/LONDON, November 30 (Fitch) Fitch Ratings has affirmed FCP Emergence Serenite's Fund Credit Quality Rating at 'AAAf(mar)' and Fund Market Risk Sensitivity Rating at 'S3(mar)'. The Moroccan-domiciled fund is managed by Valoris Management (High Standards(mar)). The main drivers for the Fund Credit Quality Rating affirmation are: - The high credit quality of the fund's portfolio of assets on a national scale - The fund's primary focus on bonds issued by the Moroccan government or state-owned entities - The remainder being invested in time deposits or certificate of deposits issued by high-quality local banks or subsidiaries of highly rated international banks, and reverse repurchase agreements (repos) backed by Moroccan government securities The main drivers for the Fund Market Risk Sensitivity Rating affirmation are: - Sensitivity to interest rates consistent with a 'S3(mar)' Fund market Risk Sensitivity Rating - Contained spread duration exposure KEY RATING DRIVERS Weighted Average Credit Quality The fund's weighted average credit quality is high on a national basis. The weighted average rating factor (WARF) was 0.14 at end-August 2016, which is consistent with a Fund Credit Quality Rating in the 'AAAf(mar)' category. The fund is mostly invested in government bonds issued by the Kingdom of Morocco (at least 90% of portfolio assets excluding repos and liquidities), as per its prospectus guidelines. The remaining 10% can only be invested in highly rated or publicly owned banks' certificate of deposits. The fund may have recourse to repos and time deposits to manage its liquidity. For repos, the fund can be either on the lender side (with a limit of 20% exposure per repo counterparty), or on the borrower side, therefore being in leverage (authorised up to 10% by regulation). Portfolio Sensitivities to Market Risks The fund's interest rate duration is maintained below five years. At end-October 2016, the fund had an interest rate duration of 3.9 years, and 42% of total assets maturing within three years. The fund's investment guidelines do not constrain the maturity of assets. At end-October, the longest asset maturity was 19 years and the portfolio's weighted average life was 4.6 years. The fund has no foreign exchange exposure and does not use any derivative instruments. The resulting market risk factor of the fund is in line with a 'S3(mar)' Fund market Risk Sensitivity Rating. Fund Profile FCP emergence Serenite is a Morocco-domiciled bond fund pursuant to the Moroccan regulation. As of end-October 2016, the fund's total assets stood at MAD1.9m. The Advisor Valoris Management is the asset management arm of Capital Gestion Group for open-ended funds. It is an independent asset management company owned by its two co-founding partners and, to a lesser extent, other senior executives of the company. At end-September 2016, Valoris Management was managing MAD24.9bn worth of assets. The company employs eight investment professionals, four middle- and back-officers and one compliance and control officer. Some activities such as commercial, IT, administrative and financial functions are outsourced to Capital Gestion Group as part of resource mutualisation within the group. RATING SENSITIVITIES The rating may be sensitive to material changes in the fund's credit quality or market risk profile. A material adverse deviation from Fitch's guidelines for any key rating driver could cause Fitch to downgrade the rating. For example, if credit deterioration occurs such that the WARF increases beyond criteria levels for a 'AAAf(mar)' Fund Credit Quality Rating, the rating may be downgraded. WARF-stress testing based on the downgrade of concentrated exposures indicate a lower-implied Fund Credit Quality Rating than 'AAAmmf(mar)' due to the fund's consistently large allocation to the Moroccan sovereign. However, a downgrade of the sovereign's International Long-Term Issuer Default Rating may not necessarily result in a downgrade of either fund's National Money Market Fund Rating, as it could continue to represent the lowest credit, market and liquidity risk available in Morocco, in line with Fitch's national scale rating approach. However, this is based on the assumption that liquidity in capital markets will not be structurally impaired to the extent it prevents funds from meeting Fitch's national scale rating criteria. Potential downgrades to the Fund Market Risk Sensitivity Rating are limited in scope, given the fund's maximum duration of five years, and the fund's investment guidelines. To maintain the fund's ratings, Fitch receives monthly fund and portfolio holdings information from Valoris Management, and conducts surveillance checks against its rating criteria. Contact: Primary Analyst Charlotte Quiniou, CFA Director +33 1 44 29 92 81 Fitch France S.A.S 60 rue de Monceau 75008 Paris Secondary Analyst Patrick Chaussy Analyst +44 203 530 1803 Committee Chairperson Alastair Sewell, CFA Senior Director +44 203 530 1147 Media Relations: Rose Connolly, London, Tel: +44 203 530 1741, Email: Additional information is available on Applicable Criteria Global Bond Fund Rating Criteria (pub. 22 Aug 2016) here Additional Disclosures Solicitation Status here Endorsement Policy 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 WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. 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