OREANDA-NEWS. Fitch Ratings has affirmed CDG Capital Gestion's (CKG) National Asset Manager Rating at 'Highest Standards(mar)'. The Outlook is Stable.

KEY RATING DRIVERS

The rating reflects the high quality of CKG's risk management and control framework, operations workflows, alongside the well-staffed business organisation. The rating also takes into account CKG's long track record in serving institutional clients and solid market position in the Moroccan asset management industry, as well as the financial strength of its parent, CDG Group.

CKG's main challenge is to further diversify the client base outside institutional group-related investors. Progress has been made in this direction with the recent addition of institutional clients. Capitalising on its network partnerships (Credit Immobilier et Hotelier (CIH), and more recently Al Barid Bank (ABB)), and pursuing its development of innovating and differentiating products will be instrumental in the currently competitive environment.

CKG's 'Highest Standards(mar)' rating is based on the following category scores:

Company: Highest

Controls: Highest

Investments: Highest

Operations: Highest

Technology: Highest

Asset manager operations in the 'Highest Standards(mar)' category demonstrate an investment platform and operational framework that Fitch considers superior relative to the standard applied by domestic institutional investors.

Company

As the second-largest asset management company in Morocco, CKG benefits from a strong track record and market presence in the institutional space. Without an internal banking network, CKG relies on its network partners, CIH (launched in 2007), and more recently ABB (launched in late 2013). CKG is well-staffed, and has mutualised some of its resources with CDG Capital. A combined middle - and back - office was created as part of this development, adding two new staff to the team. It also led to the expansion of the risk management function with the net addition of three new roles covering separately investment risk, operational risk and credit risk, respectively headed by an experienced Risk Manager.

Controls

The newly pooled control structure comprises three internal controllers, as well as an enlarged risk management department of four, compared with just one last year. Risk procedures and policies, such as those governing conflicts of interest, counterparty selection, and voting policies are maintained and regularly updated. Guidelines and limits are monitored in MANAR (a third-party central system for monitoring investment positions), with any breaches reported through formal escalation procedures. This has led to a decrease of incidents over the past year.

Investments

The investment process primarily focuses on domestic fixed income and equity markets, with marginal coverage of international assets. The decision-making process is clearly structured and based on a consensual approach in committees. Credit analysis coverage has been extended over the past year. Every issuer is analysed quantitatively and qualitatively, leading to an overall internal score, which is presented in credit committees, and updated at each new issue. One additional Portfolio Manager (PM) joined the team since June 2016, taking staff numbers to 9 PMs and one analyst/trader as of end-June 2016.

Operations

The team is well-staffed relative to the volumes and instruments traded.. CKG's operational and valuation procedures are well-documented and adequately controlled. The central position-keeping and operations tool, MANAR, effectively meets operational requirements and is regularly upgraded with new modules and functionalities. Cash reconciliations are done daily, and broker reconciliations are well-automated. Improved automation of the reporting production is currently in progress.

Technology

IT projects and developments are delegated to a third-party provider, Atos, since end-2014. A member of CKG staff is deployed on-site to respond swiftly to specific needs, and is also involved in infrastructure projects and IT platform updates. MANAR is the company's core system for portfolio position-keeping, trade life cycle management, controls of investment constraints and back-office activities. The system adequately meets CKG's needs and coverage.

Incorporated in 1997, CKG is a subsidiary of CDG Capital, itself owned by CDG Group, a public institution and the largest institutional investor in Morocco, with a large portfolio of activities. At end-June 2016 CKG was the second-largest Moroccan asset manager with MAD53.9bn (around EUR5bn) assets under management. CKG serves group subsidiaries, large institutional investors such as pension funds, banks, foundations and insurance companies, as well as corporates. Its assets are concentrated on fixed income (90%), in line with the overall local market, with the remainder being equity and balanced portfolios.

RATING SENSITIVITIES

The rating could be downgraded as a result of material adverse changes to any of the rating drivers, notably through weakened financial conditions, heightened staff turnover or deterioration of processes and policies.