July 16, 2012 / 2:08 PM / 5 years ago

TEXT-Fitch affirms Henderson Cash Fund

(The following statement was released by the rating agency)

July 16 - Fitch Ratings has affirmed Henderson Cash Fund's (HCF) fund credit rating and fund volatility rating at 'AAA' and 'V1', respectively. The fund is advised by Henderson Global Investors Ltd. (Henderson). KEY RATING DRIVERS: The affirmation of the fund credit rating reflects the portfolio's overall high credit quality as measured by its weighted average rating factor (WARF) and the distribution of the underlying asset ratings consistent with applicable rating criteria. It also recognises the investment advisor's capabilities and resources and the portfolio manager's conservative management approach. The affirmation of the 'V1' fund volatility rating reflects the low sensitivity to market risk factors such as interest rate and spread risks, as reflected in its short maturity profile. ASSET CREDIT QUALITY: The weighted average credit quality of the fund is high as indicated by the fund's low WARF, which also reflects the short maturities of the fund's assets. At end-June 2012, all of its assets were in the 'A' category with concentration at 'AA-' rating level (36.4 %) and 'A' rating level respectively (37.5 %). However, approximately 17% of the issuers in the portfolio had a Negative Outlook at end-June 2012 and one issuer (0.6%) was on Rating Watch Negative. The HCF has a conservative profile and does not hold derivative positions or engage in repo transactions. The portfolio security holdings were diversified across 27 issuers at end-June 2012. Therefore, the fund's concentration risk is fairly limited, although not negligible. The largest exposure to a single issuer is 7.5%, albeit with an outstanding average tenor of less than three month. The five largest obligors comprise about 32 % of the portfolio. PORTFOLIO SENSITIVITY TO MARKET RISKS: The HCF has low exposure to market risk factors such as interest rate and spread risks. Interest rate risk is managed within tight limits with a weighted-average maturity to reset (WAMr) below 180 days. At end-June 2012, WAMr was 66 days, well in line with the fund's assigned 'V1' volatility rating which represents a low sensitivity to market risk. The fund does not use leverage and over the past 12 months has not taken any currency risk away from its base currency. FUND PROFILE: The fund is established in the UK as an authorised unit trust regulated by the UK's Financial Services Authority and is a UCITS III (Undertaking for Collective Investments in Transferable Securities) compliant scheme. The fund's objective is to provide an enhanced level of income commensurate with security of capital through investment primarily in short-term deposits, money market instruments and, at the manager's discretion, fixed interest securities. As of end-June 2012, the fund's total assets stood at GBP356.9m. To provide short-term liquidity, 7% of the portfolio is held in a call account with one different counterparty, plus overnight deposits. THE ADVISOR: Henderson, the fund's investment advisor, is a UK-based independent global asset management company and a subsidiary of the Henderson Group plc. Henderson managed GBP66.7bn of assets globally at the end of March 2012, of which about 23% are fixed income assets. To maintain bond fund ratings, the administrator of the HCF, BNP Paribas Fund Securities Services, provides Fitch with monthly information on the fund, including a detailed portfolio holdings report. Fitch closely monitors the credit composition of the portfolios, the credit counterparties used by the manager and the overall market risk profile of the investments. RATING SENSITIVITY: Funds in the 'AAA' rating category indicate the highest underlying credit quality (or lowest vulnerability to default). The assets of the fund are expected to maintain a weighted average portfolio rating of 'AAA'. Funds rated 'V1' are considered to have low sensitivity to market risk. On a relative basis, total returns are expected to exhibit high stability, performing consistently across a broad range of market scenarios. The ratings may be sensitive to material changes in the credit quality or market risk profiles of the funds. A material adverse deviation from Fitch guidelines for any key rating driver could cause Fitch to lower the ratings. For example, if credit deterioration occurs such that the weighted average risk factor (WARF) increases beyond criteria levels for a 'AAA' credit rating, negative ratings action may occur to the credit rating. Potential downgrades to the volatility rating are limited in scope, given the low sensitivities of the funds to interest rate and spread risks. (Caryn Trokie, New York Ratings Unit)

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