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Wednesday, November 06, 2013

Ind-Ra Affirms Goldman Sachs Liquid Exchange Traded Scheme at 'IND A1+mfs'

India Ratings & Research (Ind-Ra) has affirmed Goldman Sachs Liquid Exchange Traded Scheme (GS Liquid BeES), a fund managed by Goldman Sachs Asset Management (GSAM), at 'IND A1+mfs'. 

Key Rating Drivers 

The affirmation reflects the fund's overall high credit quality and diversification, minimal exposure to interest rate and spread risks, short maturity profile with high overnight and one-week liquidity and GSAM's strong capabilities and resources as an asset manager.
Consistent with Ind-Ra's 'IND A1+mfs' money market fund rating criteria, the fund maintains a high credit quality by investing exclusively in short-term securities rated 'IND A1+' by the agency or of equivalent credit quality. Also, the fund has limited exposure to individual issuers and counterparties. As of 27 October 2013, the fund had over 98% of its investments in collateralised borrowing and lending obligations (CBLO), which are highly liquid securities. 

The rating also reflects the fund's low portfolio credit factor (PCF), which is a measure of the credit quality and maturity profile of the portfolio securities. PCF has remained between 0.10 and 0.16 over the past one year, signifying a very low risk of loss of net asset value in a stress situation. Also, the fund meets Ind-Ra's ‘IND A1+mfs' rating criterion of PCF being 1.50 or less. 

The rating is also supported by low interest rate and spread risk in the fund as indicated by its low weighted average maturity (WAM) to reset date and weighted average life (WAL), both having remained below 7 days over the past one year. As on 27 October 2013, the fund's WAL was only 4.7 days. 

The fund manages investor redemption risk through investment restrictions that aim to maintain sufficient levels of daily and weekly liquidity. In line with Ind-Ra's rating criteria, the fund seeks to maintain at least 65% of its assets in securities maturing overnight (27 October 2013: 98%) or a variety of other qualifying liquid assets such as CBLOs, T-Bills or government securities. The diversified portfolio of liquid assets comprises short-term money market instruments, to fulfil the fund's objective of capital preservation and liquidity. The fund had assets under management of INR6.4bn as of 27 October 2013. 

Rating Sensitivities 

A rating change could result from a material change in the credit quality or market risk profiles of the fund. A material adverse deviation from Ind-Ra's guidelines for any key rating driver could cause the agency to downgrade the rating.
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