Oct 8 - Fitch Ratings has assigned an 'AAAmmf' rating to the AllianceBernstein Exchange Reserves
, a prime money market fund managed by AllianceBernstein.
The rating assignment reflects the fund's extremely strong capacity to achieve its investment objectives of preserving capital and providing shareholder liquidity through limiting credit, market and liquidity risks.
KEY RATING DRIVERS
--The fund's overall credit quality and diversification;
--Short maturity profile;
--Minimal exposure to interest rate and spread risk;
--The capabilities and resources of AllianceBernstein as investment advisor.
As of Sept. 20, 2012, the fund had $2.04 billion in assets under management.
CREDIT QUALITY AND DIVERSIFICATION
The fund seeks to maximize current income consistent with the safety of principal and liquidity by investing. These may include: short-term obligations issued or guaranteed by the U.S. government, its agencies or instrumentalities; certificates of deposit issued by domestic and foreign banks; high-quality commercial paper (short-term corporate debt issued by U.S. or foreign companies); and other short-term investment instruments.
Under normal market conditions, the fund invests in securities rated at least 'A-' or 'F1' by Fitch or equivalent or enters into repurchase agreements with counterparties rated at least 'F1' or equivalent. Similarly, under normal market conditions, the fund limits exposure of all credits in the portfolio to 5% of its assets - this applies to direct issuers, repurchase agreement counterparties, municipal letter of credit providers as well as underlying municipal obligors. All repurchase agreements purchased are overcollateralized by 102% with U.S. Treasury or government agency securities. The fund does not invest in ABS, MBS or ABCP, other than Straight-A funding.
These investment policies are consistent with Fitch's 'AAAmmf' rating criteria.
As of Sept. 20, 2012, the fund's Portfolio Credit Factor, which is a risk weighted measure of the credit quality and maturity profile of portfolio assets, was also consistent with Fitch's 'AAAmmf' rating criterion of 1.50 or less.
The fund manages its market risk exposure by limiting its weighted average maturity (WAM) and weighted average life (WAL) to 60 and 120 days, respectively. As of Sept. 20, 2012, the fund had a WAM of 33 days and a WAL of 75 days.
To limit liquidity risk, the fund seeks to invest at least 10% of its assets in daily liquid securities and at least 30% of its assets in weekly liquid securities. As of Sept. 20, 2012, the fund's available daily and weekly liquidity levels were consistent with Fitch 'AAAmmf' rating criteria.
Approximately 50% of shareholder money in the fund originates from various AllianceBernstein's equity mutual funds as part of their securities lending/collateral reinvestment program. As a result, Fitch views the shareholder base as being somewhat concentrated relative to available overnight liquidity. However, this concentration risk is substantially mitigated by several factors, including the capabilities, resources and risk management oversight of AllianceBernstein; the diversified nature of the various equity mutual funds and the securities lent; and a focus on lending 'hot issues' where equity fund managers maintain long-term convictions. Furthermore, expected inflows from external investors into the AllianceBernstein Exchange Reserves fund should serve to diversify the shareholder base over time.
AllianceBernstein, L.P., rated 'A+/F1' with a Stable Outlook, is a global, diversified asset manager (USD411 billion assets under management as at Aug. 31, 2012), approximately 63% owned by AXA S.A. (rated 'A/F1', Outlook Stable). AB has been investing in high yield and emerging market debt since the early 1990s. Money market assets under management were $9.2 billion as of Aug. 31, 2012.
RATING SENSITIVITY AND SURVEILLANCE
The rating may be sensitive to material changes in the credit quality, market or liquidity risk profiles of the fund. A material adverse deviation from Fitch guidelines for any key rating driver could cause the rating to be lowered by Fitch, including adverse changes in shareholder concentration and/or increases in unanticipated cash outflows. Given the portfolio's primary investment focus on domestic and foreign issuers in the financial sector, the ratings may also be sensitive to material adverse changes in the sector globally.
Fitch expects to receive weekly portfolio holdings information from the fund's administrator to conduct surveillance against ratings guidelines and maintain its money market fund rating.
Surveillance and analytical information on this fund is expected to be available in the Funds Surveillance section of Fitch's web site ('
') in the near future.
The sources of information used to assess this rating were the public domain and DIMA.
Additional information is available at '
'. The ratings above were unsolicited and have been provided by Fitch as a service to investors.
Applicable Criteria and Related Research:
--'Global Money Market Fund Rating Criteria', March 29, 2012;
--'U.S. Money Market Funds Sector Update: First-Quarter 2012', July 12, 2012.
Applicable Criteria and Related Research:
Global Money Market Fund Rating Criteria
U.S. Money Market Funds Sector Update: First-Quarter 2012
(New York Ratings Team)