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Feb 28 - Fitch Ratings has affirmed the LGIM Sterling and US Dollar Liquidity Funds at'AAAmmf'. The money market funds (MMFs) are managed by L&G Investment Management (LGIM) and aresub-funds of the Irish-domiciled LGIM Liquidity Funds plc.
KEY RATING DRIVERS:
The main drivers of the affirmations are:
- The portfolios' overall credit quality, diversification and short maturity profiles
- Minimal exposure to interest rate and spread risks
- Overnight and one-week liquidity profiles consistent with Fitch's rating criteria
- The capabilities and resources of LGIM as investment advisor
The 'AAAmmf' money market fund ratings reflect the funds' extremely strong capacity to achieve the investment objectives of preserving principal and providing shareholder liquidity through limiting credit, market and liquidity risk.
PORTFOLIO CREDIT QUALITY/DIVERSIFICATION
The funds maintain high credit quality portfolios consistent with Fitch's criteria for 'AAAmmf' rated money market funds. The funds invest exclusively in short-term securities rated at least 'F1' by Fitch (or of a comparable credit quality by other global rating agencies).
Each funds' Portfolio Credit Factor (PCF) was in line with Fitch's 'AAAmmf' rating criterion of 1.50 or less. The PCF is a risk-weighted measure of the funds' portfolio assets that accounts for the credit quality and maturity profile of a fund's portfolio securities.
MATURITY PROFILE
The funds seek to limit interest rate and spread risk consistent with Fitch's ratings criteria for funds rated 'AAAmmf'. Each fund limits its weighted average maturity (WAM) and weighted average life (WAL) to 60 days and 120 days, respectively. The Sterling fund's WAM and WAL were 53 and 62 days, respectively, while the US Dollar fund's were 41 and 43 days, respectively, as at 8 February 2013.
LIQUIDITY PROFILE
In line with Fitch's rating criteria, the funds seek to maintain at least 10% of their assets in securities maturing overnight or other qualifying liquid assets such as government securities, and at least 25% in securities maturing within seven days or other qualifying liquid assets. The funds' daily and seven-day liquidities are consistent with Fitch's criteria for 'AAAmmf' rated MMFs.
FUND OBJECTIVES
The funds' objectives are to provide capital stability, liquidity and income through investment in a diversified portfolio of high credit quality short-term fixed income and variable rate securities. The funds aim to achieve this by investing in high-quality transferable money market instruments and short-term debt, and deposits. Investments include fixed-term deposits, certificate of deposits, commercial paper, treasury bills, and fixed- and floating-rate notes issued by governments, government agencies and corporates. The funds do not currently invest in asset-backed commercial paper or repurchase agreements.
INVESTMENT ADVISOR
LGIM is one of Europe's largest institutional asset managers and a major global investor. LGIM is the investment management division of Legal & General Group plc ('A'/Stable). LGIM manages GBP391bn in assets for more than 3,250 clients as 30 September 2012. Fitch views Legal & General Group plc's and LGIM's investment advisory capabilities, financial and resource commitments, operational controls, corporate governance and compliance procedures as consistent with the 'AAAmmf' rating assigned to the funds.
RATING SENSITIVITIES:
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 the ratings to be downgraded by Fitch. For additional information about Fitch money market fund ratings guidelines, please review the criteria referenced below.
SURVEILLANCE
Fitch receives weekly fund and portfolio holdings information from the funds' administrator - Northern Trust International Fund Administration Services (Ireland) Limited - to conduct surveillance against ratings guidelines and maintain its money market fund ratings.
