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Fitch Affirms IIFIG Government Liquidity Fund at 'AAAf' /'S1'
October 3, 2016 / 3:32 PM / a year ago

Fitch Affirms IIFIG Government Liquidity Fund at 'AAAf' /'S1'

(The following statement was released by the rating agency) LONDON/PARIS, October 03 (Fitch) Fitch Ratings has affirmed IIFIG Government Liquidity Fund's ratings at Fund Credit Quality Rating 'AAAf' and Fund Market Risk Sensitivity 'S1'. The fund is managed by Insight Investment and its subsidiaries. The affirmation of the Fund Credit Quality Rating is driven by the very high and stable credit quality of the fund as measured by its weighted average rating factor (WARF), which is consistent with a 'AAAf' Fund Credit Quality Rating. The rating factors in both the quality of repo counterparties and repo collateral, consistent with Fitch's approach to assessing counterparty risk. The affirmation of the Fund Market Risk Sensitivity Rating is driven by the fund's very low sensitivity to interest rate and spread risks, as reflected in the fund's maturity profile. KEY RATING DRIVERS Weighted Average Credit Quality The fund has very high weighted average credit quality, consistent with a 'AAAf' Fund Credit Quality Rating. The fund invests primarily in repo agreements whereby it repos in assets in exchange for cash (out). In all cases the quality of the repo collateral is high as the fund only accepts debt securities issued by the UK government as collateral. Repo counterparties can be banks rated 'A-' or higher or other, unrated, counterparties. In its rating criteria, Fitch looks to the credit quality of the counterparty and the collateral and when relevant, margining policy for assessing the overall credit quality of the portfolio. While the fund may have exposure to unrated repo counterparties, Fitch views the financial resources available to these entities as sufficient to meet their obligations under the repo contracts. Should any of these counterparties fail in their obligations, the fund would remain the legal owner of the collateral. The repo agreements with all counterparties are governed by standard repo documentation. Portfolio Sensitivities to Market Risks The fund has very low exposure to interest rate and spread risks. The maximum individual asset (or repo contract) maturity is 397 days. Interest rate risk is managed within a maximum weighted average maturity (WAM) to interest rate reset date limit of 60 days. Spread risk is managed through a weighted average life (WAL) to final maturity limit of 120 days. However, the maturity of repo collateral can be considerably longer. The combination of maturity limits result in a market risk profile consistent with a 'S1' Fund Market Risk Sensitivity Rating. Fund Profile The fund is a sub-fund of LDI Solutions Plus plc, an Irish-domiciled qualifying investor alternative investment fund. As such it falls outside of the UCITS regulations and is able to engage in term repo. It operates with a constant net asset value per share and its investment guidelines mean that it meets the European Securities and Markets Authority's (ESMA) definition of a short-term money market fund. Its total assets stood at GBP610m as of end-August 2016. The Advisor Fitch assesses Insight to be suitably qualified, competent, and capable of managing the fund. Insight was established in 2002, and is one of 13 specialist asset managers owned by Bank of New York Mellon (AA/Stable/F1+). Insight managed GBP499bn of assets as of end-June 2016. The fund's investment manager is Insight Investment Funds Management Limited, which has sub-delegated this function to Insight Investment Management (Global) Limited. RATING SENSITIVITIES The ratings 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 ratings. For example, if credit deterioration occurs such that the WARF increases beyond criteria levels for the rating assigned, the rating may be downgraded. Fitch's WARF stress testing shows that the rating is robust at the current rating level. The recent downgrade of the UK following the Brexit vote has not affected the rating of IIFIG Government Liquidity Fund; however, further downgrades to the UK sovereign could ultimately lead to the rating being downgraded given the fund's high exposure to gilt collateral. This risk is currently mitigated by the ultra-short term of the fund's repo contracts and the quality of the counterparties. Potential downgrades to the Fund Market Risk Sensitivity Rating are limited in scope, given the fund's low sensitivity to interest rate and spread risks, and the fund's investment guidelines. APPLICABLE RATING CRITERIA Fitch has chosen to rate the fund under its Global Bond Fund Rating Criteria. The fund meets the ESMA definition for a short-term money market fund. However, Fitch does not believe its Global Money Market Fund Rating Criteria is applicable to this fund. Specifically, Fitch has identified material differences between this fund and other funds it rates under its Global Money Market Fund Rating Criteria which also meet the ESMA short-term money market fund definition. Above all, the fund engages in repo practices which Fitch would be unable to assess under its Global Money Market Fund Rating Criteria but is able to assess under its Global Bond Fund Rating Criteria. Furthermore, unlike other money market funds the fund is not a UCITS fund and does not offer same-day settlement. Accordingly Fitch believes that its Global Bond Fund Rating Criteria are applicable and provide the most appropriate tools for assessing the risks in this fund. Contact: Primary Analyst Alastair Sewell, CFA Senior Director +44 20 3530 1147 Fitch Ratings Ltd 30 North Colonnade London E14 5GN Secondary Analyst Charlotte Quiniou, CFA Director +33 1 44 29 92 81 Committee Chairperson Gregory Fayvilevich Senior Director +1 212 908 8151 Media Relations: Rose Millburn, 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 ail=31 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. 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. Copyright © 2016 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch's factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch's ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided "as is" without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001

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