Fitch Ratings has affirmed Upline Capital Management's (UCM) National Investment Management Quality Rating (IMQR) rating at 'Excellent(mar)' with a Stable Outlook.

Upline Capital Management is a direct subsidiary of Upline Group and an indirect subsidiary of Banque Centrale Populaire.

KEY RATING DRIVERS

The affirmation is primarily driven by the consistency of UCM's investment process and resources. The rating reflects a leading, well-staffed, experienced asset manager, with a well-established investment process and a stable investment team. The rating also factors in a robust operational platform and leading risk and control practice.

UCM benefits from support provided by its shareholders, directly from Upline Group and indirectly from Banque Centrale Populaire. The performance of UCM's funds and mandates is in line with peers.

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

Investment Process: 'Excellent'

Investment Resources: 'Excellent'

Risk Management: 'Excellent'

Company and Client Servicing: 'Excellent'

Investment Performance: 'Consistent'

Investment Process: 'Excellent'

Fitch views UCM's investment process as clear, well-designed and implemented in a disciplined manner. Fund objectives and characteristics are clear and relevant information is readily available. Procedures allow flexibility, with some ad-hoc meetings to challenge quarterly investment committees. The team use different tools to help with decision-making and challenge investment decisions.

UCM's investment process features a combination of primarily proprietary top-down and bottom-up fundamental research inputs, with a qualitative and quantitative analysis. The research process is flexible, allowing the use of different macroeconomic indicators and valuation methods depending of the context. The process simulates three different scenarios and gives multi-criteria scores to issuers that the fund invests in.

Investment decision-making and portfolio-monitoring are formalised in committees and a model drives portfolio construction, with adjusted scorings that determine the weights of each asset. Portfolios are closely monitored by the investment and risk teams, with oversight from the investment committee.

Research is independent from the portfolio managers and in-house to reinforce the research process, by facilitating communication and exchanges between teams and UCM. The research department shares its macro and micro economy research that may have an impact on markets or issuers with portfolio managers.

Investment Resources: 'Excellent'

UCM's staff increased in 2022, bringing the number of employees to 27. The investment team is well-segregated across fixed income, equity and alternatives. The team comprises seven investment professionals and one research analyst. The team manages 51 funds, which brings the number of funds per portfolio manager to seven, lower than the peer average of eight. The experience and tenure inside the organisation have consistently been above peers. UCM has built a HR strategy to enable employees to progress within the company and group.

The current IT platform is built around Manar, a widely used investment-management system in Morocco, allowing timely and effective access to portfolios and trade information. UCM has also built bespoke internal applications that are integrated within Manar. The applications are used to enhance databases, monitor risks, facilitate the decision-making process and identify the performance of the fund. The IT department has been outsourced to the group to upgrade the quality and governance of the IT systems, with more secured norms. UCM is also developing a new client relationship management tool to improve the anti-money laundering (AML)/combating the financing of terrorism procedures.

Risk Management: 'Excellent'

UCM's control framework has a clearly defined strategy of 'identify, analyse and control'. The risk process is well-structured and integrated into the investment process. The risk management team comprises three analysts, which is more than current market practice. Participants in the risk process have clearly defined and independent roles. Compliance has been improved, in line with the group's strategy. The tools used are Manar, financial information provided from external sources and internal spreadsheets. Stress tests are performed on both an annual and ad-hoc basis. The stress tests are sent to the regulator twice a year.

The risk-monitoring team promotes and implements a risk culture throughout the company. Market and credit risks are closely monitored and are summarised in relative, absolute, potential loss, concentration and spread metrics in reports. Pre-trade controls, exposure limits and other various constraints are incorporated into Manar with escalation procedures if needed. UCM has reinforced its anti-money laundering procedures.

Company and Client Servicing: 'Excellent'

UCM is the second-largest investment manager in Morocco and has a long record of operations. Its assets under management (AUM) growth has averaged around 10% per year since 2017 and higher than the Moroccan market's of about 5% per year, according to the Association des Societes de Gestion & Fonds d'Investissement. Fixed income represented 87% of UCM's AUM as of end-October 2022, above the Moroccan market average of 79%.

UCM has a profitability ratio in line with its peers, with a high concentration in institutional investors. It benefits from the support of the Upline Group and extracts many synergies from its network in collaboration with its teams.

Investment Performance: 'Consistent'

UCM has consistently delivered its investment objectives, meeting investor expectations. Investment performance is therefore a neutral factor in Fitch's rating analysis.

INVESTMENT MANAGER

Created in 1999, UCM is the second-largest asset manager in Morocco with MAD87 billion AUM as of end-October 2022. UCM is majority-held by Upline Group, which itself is owned by the Banque Centrale Populaire group.

RATING SENSITIVITIES

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

The rating could be sensitive to material changes in one or several of the five IMQR pillars due to the eventual 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. Given 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 at the highest level on Fitch's rating scale and cannot be upgraded.

RATING ACTIONS

Entity / Debt

Rating

Prior

Upline Capital Management

National IMQR

Excellent(mar)

Affirmed

Excellent(mar)

Page

of 1

VIEW ADDITIONAL RATING DETAILS

Additional information is available on www.fitchratings.com

(C) 2023 Electronic News Publishing, source ENP Newswire