OREANDA-NEWS. August 03, 2015. 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 continue efforts to diversify its client base (still concentrated in institutional group-related investors) by capitalising on its network partnerships (Credit Immobilier et Hotelier (CIH), and more recently Al Barid Bank (ABB)), as well as pursuing its development towards innovating and differentiating products 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, with two funds created specifically for it). CKG is well staffed, and has reorganised its business development team, adding some resources coming from CDG Capital to accompany the gathering of mutual funds and individual mandates business following regulatory evolution. Those two activities are currently separated, as per Moroccan law.

Controls
The control structure comprises two internal controllers, as well as an independent market risk unit created in 2012, with an independent Risk Manager fully dedicated to risk control since early 2014. 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 breaches reported through formal escalation procedures. This has led to a decrease of incidents over the past years. Credit risk analysis has been improved over the last year, and further refined recently, particularly in its internal scoring approach, all of which are embodied in a documented procedure.

Investments
The investment processes primarily focus on domestic fixed income and equity markets, with a marginal coverage of international assets via funds and ETF (allowed by regulator of up to 10% of a portfolio's total 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. A new quantitative equity fund was launched at the end of 2014, with a difficult start in terms of performance. Other projects are currently in the pipeline.

Operations
The team is well staffed with regard to volumes and instruments traded. Its head, who was recruited at the beginning of 2014, has 13 years' experience. CKG's operational and valuation procedures are well documented and adequately controlled. The central position-keeping and operations tool, MANAR, adequately meets operational requirements and is regularly upgraded with new modules and functionalities, such as swaps recently. Cash reconciliations are done daily, and broker reconciliations are well-automated. Improved automation of the reporting production, which is rather manual at the moment, is currently in progress.

Technology
IT projects and developments were delegated to a subsidiary of CDG until end of 2014, before being transferred to another third-party provider, Atos. CKG also employs a member of staff onsite, to be close and responsive to specific needs and who is 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. The business recovery plan is operational, while some features of the IT backup system are yet to be enhanced following recent tests.

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, comprising a large portfolio of activities. At end-June 2015, CKG was the second-largest Moroccan asset manager with MAD50bn assets under management (around EUR4.6bn). 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 may be sensitive to material adverse changes to any of the rating drivers, notably through weakened financial conditions, heightened staff turnover or deterioration of processes and policies. A material adverse deviation from Fitch's guidelines for any key rating driver could cause the rating to be downgraded.