Fitch Ratings has affirmed BMCE Capital Gestion's (BKG) National Investment Management Quality Rating (IMQR) at 'Excellent (mar)' with a Stable Outlook.

KEY RATING DRIVERS

The affirmation reflects broad stability in BKG's profile. The rating is primarily driven by the strong discipline of BKG's investment process within a solid risk-management framework. The rating also takes into account the company's investment resources, characterised by deep system integration and automation.

BKG is Morocco's third-largest asset manager by assets under management (AUM). It benefits from the strategic commitment of its parent, Bank of Africa (BB/Stable).

BKG's 'Excellent(mar)' rating is based on the following unchanged category scores:

Investment Process: 'Excellent'

Investment Resources: 'Excellent'

Risk Management: 'Excellent'

Company and Client Servicing: 'Excellent'

Investment Performance: 'Consistent'

Investment Process: 'Excellent'

BKG's investment objectives are clearly defined. The investment process is driven by macro-economic proprietary research, top-down allocation and bottom-up securities selection. Investment decision- making and portfolio monitoring are formalised in committees.

BKG follows mainly traditional, benchmark-oriented fixed-income strategies, which is a function of the Moroccan market, but is also active in more sophisticated, niche strategies. BKG benefits from BMCE Capital Global Research's (BKGR) capabilities. BKGR is a sell-side financial research and analysis firm, and like BKG, a subsidiary of Bank of Africa.

Investment Resources: 'Excellent'

BKG employed 24 staff as of end-October 2022, including seven portfolio managers who are responsible for a total of 54 funds. The staff turnover in the investment team has been affected by three departures. The ratio of funds to portfolio manager is currently 8, up from seven in 2021 and above the peer average. Its investment staff has on average nearly nine years of experience, broadly in line with the peer average.

BKG has completed the upgrade of its IT system. The upgrade aims to improve the operational performance of some functions, such as fluidity of the control and validation process, and increasing the speed and reliability of investment valuations.

Risk Management: 'Excellent'

Fitch views BKG's risk-management framework as robust with independent oversight from risk functions and committees. Documented procedures and controls and formal reporting mechanisms further support the effectiveness of the control environment. Investment- and credit-risk limits and pre-and post-trade limits are in place. A robust risk-control framework allows BKG to effectively manage sophisticated products, which are exposed to higher operational and investment risks than traditional products managed by its peers.

Company and Client Servicing: 'Excellent'

BKG was the third-largest asset manager in Morocco at end-2022. BKG's AUM growth has on average been around 4% per year since 2017 and is slightly lower than the Moroccan market's, according to the Association des Societes de Gestion & Fonds d'Investissement. The Moroccan market has been suffering from the first aggregated decrease of AUM, since the creation of the market in 1993.

The financial profile of BKG remains solid and the organisation benefits from the support of Bank of Africa, notably in the distribution network and outsourcing of certain functions (risk management as well as middle- and back-office functions) to other group entities.

BKG's client service remains well-digitalised and innovative. The asset manager has a transactional platform for investors, which is available on smartphone. BKG also launched 'jinvestis.ma', a platform dedicated to supporting retail investors in their investment process.

Investment Performance: 'Consistent'

BKG's investment vehicles delivered on their stated investment objectives in 2022. Fitch treats investment performance as neutral when it is in line with or ahead of peers'.

INVESTMENT MANAGER

BKG had AUM of MAD74 billion at end-October 2022. It was founded in 1995 and has a less concentrated investor base in institutional (72%) than its peers. BKG offers a wide range of products covering most asset classes with a focus on fixed income.

RATING SENSITIVITIES

Factors that could, individually or collectively, lead to negative rating action/downgrade:

The rating may be downgraded on material adverse changes to any of the aforementioned rating drivers, notably through weakened financial conditions, heightened staff turnover, or IT or operational issues.

The rating could be sensitive to material adverse changes in one or several of the five IMQR pillars due to upcoming fund regulations. Fitch's analysis considers practices relative both to regulation and to best practice in the local and international markets. Achievement of minimum regulatory standards, even if raised from current standards, typically does not lead to higher scores. Instead, higher scores are associated with practices exceeding minimum regulatory standards.

Therefore, if structures and practices are not strengthened materially beyond new regulatory standards Fitch may downgrade the related pillar score. This would reflect a re-calibration of Fitch's view of newly implemented standards. As Risk management carries a high weight in Fitch's analysis, any change to the risk-management score could affect the overall rating.

Factors that could, individually or collectively, lead to positive rating action/upgrade:

The rating is the at the highest on Fitch's rating scale and cannot be upgraded.

RATING ACTIONS

Entity / Debt

Rating

Prior

BMCE Capital Gestion

National IMQR

Excellent(mar)

Affirmed

Excellent(mar)

Page

of 1

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Additional information is available on www.fitchratings.com

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