India Ratings and Research (Ind-Ra) has downgraded UTI Ultra Short Term Fund’s National Fund Credit Rating to ‘IND AAmfs’ from ‘IND AAAmfs’. The fund has also been placed on Rating Watch Negative (RWN), said a statement by the rating agency on Thursday.
The rating agency noted that the downgrade and RWN follows downward credit migration in one of the underlying investments of UTI Ultra Short Term Fund. The statement also said that Ind-Ra is closely monitoring the fund’s exposure to the investment that has seen a series of credit rating downgrades.
The RWN indicates that rating may be either affirmed or downgraded on resolution. The RWN will be resolved after Ind-Ra achieves full clarity on the stability of the credit quality of the underlying investment.
“The agency considers weighted average rating factor (WARF) as a primary driver of the fund’s credit rating. It is an indicator of portfolio’s average credit risk. The fund’s average annual WARF from June 2018 to April 2019 stood at 0.10,” said the rating agency in its statement published on May 16.
The downgrade by Ind-Ra has been based on multiple considerations including the fund’s investment policies, management capability and commitment, risk management procedures and supporting controls in ensuring consistency with the management’s objectives. The agency also said that it will continue to monitor the portfolio of the scheme regularly and take appropriate rating action as and when required.