Fitch Ratings recently posted a press releases on Reuters entitled, "Fitch Rates Harvest Prime Liquidity Money Market Fund", which announced a AAAmmf rating for a Chinese money market fund. U.K. website Money Marketing also writes "Fitch puts Matrix-owned funds on review due to firm's financial resources". The first release says, "Fitch Ratings has assigned Harvest Prime Liquidity Money Market Fund, a regulated Chinese money market fund managed by Harvest Fund Management Co., Ltd. (Harvest) a 'AAAmmf(chn)' rating. The fund was launched today through an IPO and has not yet achieved its expected size and diversification. The fund has therefore been rated based on the prospectus, and the investment guidelines and model portfolio set out by Harvest."
It explains, "The main drivers for the rating are, based upon investment guidelines: The portfolio's overall expected credit quality and diversification, Short maturity profile, Minimal exposure to interest rate and spread risks, Strong overnight and one-week liquidity profiles, and The capabilities and resources of Harvest as investment manager. The 'AAAmmf (chn)' National money market fund rating reflects the fund's expected strong capacity to achieve the investment objectives of preserving principal and providing shareholder liquidity through limiting credit, market and liquidity risk."
Fitch adds, "In line with Fitch's 'National Scale Money Market Fund Rating Criteria and expectations for a 'AAAmmf (chn)' rating, the fund seeks to maintain a high credit quality by investing exclusively in securities/counterparties with a minimum international rating of 'A-', or of comparable credit quality by other global credit rating agencies. Fitch expects the vast majority of investments will comprise sovereign bonds, policy bank bonds and exchange traded repos.... Should the sovereign's international long-term foreign currency rating be downgraded, it is likely that Harvest Prime Liquidity Fund's National Money Market Fund Rating would not be downgraded as it could continue to represent the lowest default risk available in China, in line with Fitch's national scale rating approach."
The ratings agency continues, "The fund will seek to limit its interest rate and spread risk by limiting its weighted average maturity to reset date (WAMr) to 75 days. The weighted average final maturity (WAMf), a measure of credit spread risk, is also targeted at 75 days, and therefore below the 120 days that is consistent with Fitch's 'AAAmmf(xxx)' national scale money market fund rating criteria. The objective of the Harvest Prime liquidity Money Market Fund is to provide capital stability, liquidity and income through investment in a portfolio of high credit quality money market instruments and short-term bonds."
Fitch adds, "Harvest is a Beijing-based sino-foreign fund management company offering a range of funds and services. As at 30 September 2011, Harvest had CNY214bn assets under management (USD33.5bn; EUR24.6bn) and is ranked second largest mutual fund manager in China. Harvest is owned by China Credit Trust Co., Ltd. (40 %), a state owned financial services company, by Lixin Investment Co., Ltd. (30%), a private non-listed investment company and its foreign shareholder Deutsche Asset Management (Asia) Limited (30%). Fitch views Harvest's investment management capabilities, operational controls, financial and resource commitments and compliance procedures as consistent with the 'AAAmmf(chn)' National MMF ratings."
An article citing Fitch's review of Prime Rate funds says, "Fitch has placed three institutional money market funds managed by Matrix-owned Prime Rate Capital Management on review due to its financial resources. The ratings agency has placed the prime rate euro liquidity fund, prime rate sterling liquidity fund and US dollar liquidity fund that are rated AAA, on negative rating watch. This means the investment is placed on a review that could result in a downgrade."
The Money Marketing piece quotes a statement from Fitch saying, "The sponsor's financial resources are no longer consistent with a 'AAAmmf' rating, even after taking into consideration the funds' conservative investment guidelines. The review does not reflect any negative development in the funds' investment portfolios, which continue to be conservatively managed and fully meet the 'AAAmmf' portfolio guidelines set forth in Fitch's rating criteria for money market funds."
Prime Rate is the 18th largest out of 19 managers tracked by Crane Data's Money Fund Intelligence International with $2.4 billion in US Dollar, Euro and Sterling money funds. The manager is also a memeber of the London-based Institutional Money Market Funds Association. The company's flagship Sterling fund, Prime Rate Sterling Liquidity Fund, has lost L553 to L1.235 billion in the week ended Dec. 15.
