Fitch Affirms Two Yapi Kredi-Managed Pension Funds at 'Good'; Downgrades One to 'Good' from 'Strong'
Allianz Yasam ve Emeklilik Government Debt Instrument Group Pension Fund affirmed at 'Good'
Allianz Yasam ve Emeklilik Managed Pension Fund affirmed at 'Good'
Allianz Yasam ve Emeklilik First Managed Group Pension Fund downgraded to 'Good' from 'Strong'
KEY RATING DRIVERS
The downgrade of Allianz Yasam ve Emeklilik First Managed Group Pension Fund reflects Fitch's view that the fund's positive performance adjustment that was applied to the rating is no longer appropriate. The fund's performance has been in line with its composite benchmark over three and five years, and underperformed by 1.1% in 2015 to end-September. This highlights a close benchmarking of the fund's strategy to its reference composite index and a good but not consistently superior risk and performance through time under Fitch's Fund Quality Rating criteria.
This rating and the affirmation of the other two funds' 'Good' ratings reflect the disciplined security selection and asset allocation process of the three funds. The depth of Yapi Kredi Portfoy's dedicated investment resources and its solid expertise and depth of experience in the domestic market further support the ratings.
The funds are Turkish regulated pension funds. Allianz Yasam ve Emeklilik First Managed Group Pension Fund and Allianz Yasam ve Emeklilik Managed Pension Fund are conservative balanced pension funds; their respective benchmarks consist of 75% and 90% fixed income instruments. Allianz Yasam ve Emeklilik Government Debt Instrument Group Pension Fund is a traditional, low-risk, fixed income pension fund with minimum 80% in government debt securities.
The funds' core approach is a traditional top-down driven fundamental and macroeconomic analysis for asset allocation, duration management and yield curve positioning. Investment decisions are collegial, taken during weekly committees that define allocation bands for fixed- income exposure, asset type and duration. Credit selection and stock picking, where relevant, are well formalised, driven by quantitative, fundamental, relative value and liquidity considerations.
The lead portfolio manager for the three funds operates with some autonomy within the given guidelines. The independent risk management function oversees a formalised risk-limiting framework, including rigorous stop loss discipline.
Pension funds are managed in a consensual manner by a dedicated investment team at Yapi Kredi Portfoy, separated from other portfolio management teams since end-2014 in recognition of their long-term oriented investment strategy and differing redemption features relative to mutual funds. They benefit from the depth of Yapi Kredi Portfoy's investment and support functions.
There have been some changes in the pension fund management team in 2015 with the former lead portfolio manager of the funds now heading the pension team and following staff departures. The new lead portfolio manager of the funds has 19 years of investment experience. Two experienced co-managers for bonds and equities assist him in fine-tuning the exposure to relevant asset classes.
Yapi Kredi Portfoy expects to complete a major upgrade of its front-to-back platform in the near future. The previous and new platforms are currently used in parallel run. The operational and technological platform is overall robust and matches the requirements of the funds.
Allianz Yasam ve Emeklilik Government Debt Instrument Group Pension Fund and Allianz Yasam ve Emeklilik First Managed Group Pension Fund have performed in line with their respective benchmark over one and three years to end-September but lagged behind peers. Allianz Yasam ve Emeklilik Managed Pension Fund has underperformed its benchmark over by 1.3% and 4.3% over the same periods.
Yapi Kredi Portfoy (Asset Manager Rating 'Highest Standards (tur)') is part of the Koc Group and was established in 2002. It is one of Turkey's leading asset managers with TRY12.5bn assets under management (including 44% in pension funds) at end-December 2014. The company has a long track record of managing domestic fixed-income and money market assets, which together represent around 80% of assets under management.
The ratings may be sensitive to material changes in the investment or operational processes or in the resources dedicated to the funds. A material adverse deviation from Fitch's guidelines for any key rating driver could result in a downgrade. For example, this may be manifested in significant structural deterioration in the funds' performance or excessive risk-taking. Fitch sees limited key person dependency given the depth of the investment team.
Conversely, an upgrade of the funds could result from a demonstrated ability to outperform peers consistently on a risk-adjusted basis over five years.
Fitch's Fund Quality Ratings combine Fitch's experience in qualitative fund analysis with rankings and performance data from Lipper, a Thomson Reuters company. Fitch's Fund Quality Ratings offer an independent, forward-looking assessment of a fund's key performance and risk attributes and consistency of longer-term returns, relative to peer group or benchmarks. The ratings focus on the fund manager's investment process, key fund performance drivers, risk management, and the quality of the fund's operational infrastructure.
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