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Fitch Affirms 2 CCLA Managed Deposit Funds at 'AAAf'/'S1'.

London: Fitch Ratings has affirmed The CBF Church of England Deposit Fund's (CBF) and The COIF Charities Deposit Fund's (COIF) ratings at Fund Credit Quality 'AAAf' and Fund Market Risk Sensitivity 'S1'. The funds are managed by CCLA Investment Management Limited (CCLA).

The affirmation of the Fund Credit Quality Ratings is driven by the continuing high credit quality of the funds as measured by their weighted average rating factors (WARF), which are consistent with a 'AAAf' Fund Credit Quality Rating, and by limited sensitivity to Fitch's stress testing analysis.

The affirmation of the 'S1' Fund Market Risk Sensitivity Ratings is driven by the funds' continuing low sensitivity to interest rate and spread risks, as reflected in the funds' short maturity profile.

KEY RATING DRIVERS

Weighted Average Credit Quality

The high weighted average credit quality of the funds is indicated by their WARF, which were 0.18 for CBF and 0.19 for COIF as at end-August 2017. The funds' investment guidelines allow a minimum credit quality of 'A-' at purchase.

The funds' investment guidelines limit the amount of risk the funds can take based on a combination of self-imposed criteria. These criteria include limits on minimum credit quality, (A-), maximum counterparty limits (10% per counterparty) and a maximum individual exposure maturity limit (of one year), among others.

Portfolio Sensitivities to Market Risks

The funds have low exposure to interest rate and spread risks. The weighted average maturity (WAM) and life (WAL) were close to 90 days for both funds, resulting in a market risk factor well within the 'S1' Fund Market Risk Sensitivity Rating range as of end-August 2017. The funds' WAMs are limited to 120 days as per their respective investment policies. Both funds invest solely in GBP instruments and deposits and neither fund is allowed to utilise leverage.

The Trustee and Advisor

The funds' trustees are CBF Funds Trustee Limited (CBFFT) and the COIF Board. Both CBFFT and the COIF Board have delegated to CCLA the investment management and administrative responsibilities for the respective funds.

COIF is classified as an alternative investment fund under applicable regulation and accordingly is managed by CCLA Fund Managers Limited, an Alternative Investment Fund Managers Directive-compliant (wholly owned) subsidiary of CCLA.

CCLA is a UK-based fund management group offering a range of fund products. CCLA is jointly owned by CCLA Executive Directors, The CBF Church of England Investment Fund, The COIF Charities Investment Fund and the Local Authorities' Mutual Investment Trust. An independent operational risk, internal audit and compliance team maintains oversight of the funds' operations. At as end-March 2017, CCLA managed GBP7.1 billion of assets.

CBFFT and the COIF Board appointed HSBC Bank plc (AA-/Stable/F1+) in 2014 as depositary and administrator of both funds.

Fund Profiles

Both CBF and COIF aim to pay competitive rates of interest to reflect short-dated money market rates. The assets of the funds are invested in eligible securities of counterparties who are regularly reviewed and annually approved by COIF Board members and CBFFT respectively.

CBF and COIF respectively had GBP655 million and GBP1,037 million of assets under management as of end-August 2017.

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 drivers could cause Fitch to downgrade the ratings. For example, if credit deterioration occurs such that the WARF increases beyond criteria levels for a 'AAAf' Fund Credit Quality Rating, the ratings may be downgraded. Fitch's WARF stress testing shows that the ratings are robust at the current rating level.

Potential downgrades to the Fund Market Risk Sensitivity Ratings are limited in scope, given the funds' low sensitivity to interest rate and spread risks, and the funds' investment guidelines.
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Publication:Daily the Pak Banker (Lahore, Pakistan)
Date:Dec 15, 2017
Words:627
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