Fitch Affirms Sanlam Alternative Income Fund at 'AA- (zaf)'
Fitch Ratings-London/Johannesburg/Paris-03 November 2009: Fitch Ratings has today affirmed Sanlam Alternative Income Fund's (SAIF) National Fund Credit rating of 'AA- (zaf)'.
The rating is mainly based on an evaluation of the fund's average and lowest credit quality, as well as its investment management and operational set up. Currently, 81% of the fund holdings are rated 'AA- (zaf)' or above (approximately 60% has a Negative Outlook). The remainder are rated between 'A- (zaf)' and 'A+ (zaf)'. Additionally, Fitch outlines that due to the limited number of financial institutions in South Africa, the fund's diversification is structurally constrained. Arguably, the agency will monitor closely any rating change among the investment universe and the subsequent impact on the overall portfolio credit risk.
SAIF was established on 25 May 2007 as an open-ended rand-denominated preference share conduit fund with the objective to provide liquidity and capital preservation mainly through dividend yielding underlyings. It invests in cumulative, variable-rate preference shares redeemable within three-to-five years of issue and in money market funds. It may also invest in liquid assets with notice periods up to 90 days. The fund does not have any exposure to listed perpetual shares. The preference share investments typically have put options written by institutions rated 'A- (zaf)' or better. The Fund Credit rating has been assigned on the basis of the agency's understanding that the put options on the preference shares held by the fund are unconditional, irrevocable, enforceable and expediently recoverable.
The fund is managed by Sanlam Collective Investments (SCI) through an advisory partnership with Nodus Financial Technologies. SCI was established in 1967 as a full subsidiary of Sanlam Limited (rated 'AA- (zaf)'/Outlook Negative). At end-Sept 2009, SCI's assets under management totalled ZAR54bn across 62 funds. The fund is regulated by the Financial Services Board and Collective Investment Scheme Control Act.
Fitch's National Fund Credit ratings are based on the same scale as that applicable to Fitch's National Long-term ratings, wherein a 'AA- (AA minus)(zaf)' rating indicates high credit quality within South Africa. Fitch's Fund Credit ratings do not address any risk other than credit risk. In particular, these ratings do not evaluate the impact of market risk on net asset value (NAV) variations, and therefore do not provide an indication of the stability of the fund's NAV. The agency has not assigned a Volatility rating for this fund. Importantly, the assigned fund credit rating does not comment on the liquidity of the underlying assets, which is deemed limited, as far as preference shares are concerned.
Contact: Nicolas Beneton, Paris, +33 1 44 299 273; Keranka Dimitrova, Paris, +33 1 44 299 280, Alfons Ideler, Johannesburg, +27 11 380 0901
Media Relations: Francoise Alos, Paris, Tel: +33 1 44 29 91 22, Email: francoise.alos@fitchratings.com; Hannah Warrington, London, Tel: +44 (0) 207 417 6298, Email: hannah.warrington@fitchratings.com.
Note to Editors: Fitch's National ratings provide a relative measure of creditworthiness for rated entities in countries with relatively low international sovereign ratings and where there is demand for such ratings. The best risk within a country is rated 'AAA' and other credits are rated only relative to this risk. National ratings are designed for use mainly by local investors in local markets and are signified by the addition of an identifier for the country concerned, such as 'AAA(zaf)' for National ratings in South Africa. Specific letter grades are not therefore internationally comparable.
Additional information is available at www.fitchratings.com.
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