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Fitch Ratings-Taipei/Paris/Singapore-11 August 2009: Fitch Ratings has today affirmed Taiwan Life Asset Management (TLAM) Solomon Bond Fund's credit ratings at 'A+(twn)' and upgraded its volatility rating to 'V2(twn)' from 'V3(twn)'.
The 'A+(twn)/V2(twn)' ratings reflect the fund's good average-portfolio credit quality and strong liquidity capacity. The quasi money-market fund aims to preserve principal value and provide a high degree of liquidity. It was managed according to conservative investment practices regarding asset types, credit quality and maturity profiles.
The upgrade of the fund's volatility rating reflects its much-reduced risk adjusted duration which, in line with Fitch's rating criteria on funds. The fund has prepared for a transition to become a money-market fund (possibly in 2010) and intends to gradually reduce corporate bond assets with maturities of greater than one year. The fund has materially reduced its weighted-average duration to 0.4 years at end-July 2009, from 0.7 years yoy. Securities with a maturity of one year or less account for 85% of current total asset under management (AUM). Fitch notes the fund has strong liquidity to meet redemptions, given its notably enhanced liquidity profile.
The fund invests in highly-rated money-market instruments and debt papers based on Fitch's national rating scale; 91% of the fund's current AUM were assets rated at least 'A-(twn)'. Sector diversification is often limited, with the financial sector dominant among short-term issuers. In anticipation of the deterioration in the domestic credit market, the manager has notably tightened its credit standards.
The fund suffered some withdraws at the time of the Lehman Brothers Inc. fallout last September, but has quickly recovered. Its AUM fell by 5% between June 2008 and June 2009, compared with the overall growth of 3% for medium-to- small-sized quasi money-market funds.
Fitch notes that quasi money-market fund managers are under growing pressure to maintain investor returns as interest rates drop sharply. In recognition that yields could barely cover management fees in the event of a prolonged low-interest- rate environment, TLAM Solomon Bond Fund has planned to waive its fees to avoid a negative yield.
The fund is managed by TLAM. TLAM is 89.22% owned by Taiwan Life Insurance Company and had TWD7.6bn under management at end-June 2009, of which TWD6.7bn was in quasi money-market funds.
Profiles of the funds, including the rating, maturity and portfolio instrument breakdowns, will be available shortly on Fitch's website, www.fitchratings.com.
Contact: Yuchi Fan, Jonathan Lee, Taipei, +886 2 8175 7600.
Note to Editors: Fitch's national bond fund credit ratings are assigned on a scale of 'AAA(twn)' to 'D(twn)', and the rating scale is similar to that of Long-term credit ratings. Meanwhile, the volatility ratings are assigned on a scale of 'V1(twn)' (least volatile) through to 'V10(twn)' (most volatile). These ratings provide a relative measure of creditworthiness and volatility in comparison with other bond funds only within Taiwan and are thus not internationally comparable.
Media Relations: Shivani Sundralingam, Singapore, Tel: + 65 6796 7215,
Email:
shivani.sundralingam@fitchratings.com.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 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. The issuer did not participate in the rating process other than through the medium of its public disclosure.
