Fitch Affirms Henderson Institutional Cash Fund at 'AAAf'/'S1'
The affirmation of the Fund Credit Quality Rating is driven by the high credit quality of the fund as measured by its weighted average rating factor (WARF), which is consistent with a 'AAAf' Fund Credit Quality Rating.
The affirmation of the 'S1' Fund Market Risk Sensitivity Rating is driven by the fund's low sensitivity to interest rate and spread risks, as reflected in the fund's short maturity profile.
KEY RATING DRIVERS
Weighted Average Credit Quality
The fund's weighted average credit quality is high, as indicated by the fund's WARF, which was 0.16 at end-August 2016. The fund's investment guidelines allow a minimum credit quality of 'A' at purchase.
Portfolio Sensitivities to Market Risks
The fund has low exposure to interest rate and spread risks. Interest rate risk is managed within a maximum weighted-average maturity to reset date (WAM) of 180 days. The fund's WAM was 122 days and its weighted average life (WAL) to final maturity date (which measures sensitivity to spread risk) was 122 days, resulting in a market risk factor well within the 'S1' Fund Market Risk Sensitivity Rating range as of end-August2016. The fund does not use leverage or take foreign currency exposures.
The fund is domiciled in the UK as an authorised unit trust regulated by the UK's Financial Conduct Authority and is UCITS-compliant. 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. The fund's total assets stood at GBP479m as of end-August 2016.
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 GBP95bn of assets globally at end-June 2016, of which GBP27.5bn were fixed income assets.
The ratings may be sensitive to material changes in the fund's credit quality or market risk profile. A material adverse deviation from Fitch's guidelines for any key rating driver could cause Fitch to downgrade the ratings. For example, if credit deterioration occurs such that the WARF increases beyond criteria levels for a 'AAA' Fund Credit Quality Rating, the rating may be downgraded. Fitch's WARF stress testing shows that the rating is robust at the current rating level. The recently announced merger between Henderson and Janus Capital will not affect the fund's ratings.
Potential downgrades to the Fund Market Risk Sensitivity Rating are limited in scope, given the fund's low sensitivity to interest rate and spread risks, and the fund's investment guidelines.