Announcements Financial Institutions Rating Alerts

GCR Accords Radix Asset Management Limited A Manager Quality Rating Of BBB-(NG)(mq); Outlook Stable.

Lagos Nigeria, 25 March 2020–Global Credit Ratings has accorded a manager quality rating of BBB-(NG)(mq) to Radix Asset Management Limited; with the outlook accorded as Stable. The rating is valid until September 2020.

SUMMARY RATING RATIONALE

Global Credit Ratings (“GCR”) has accorded the above credit ratings to Radix Asset Management Limited (“Radix AM” or “the manager”) based on the following key criteria:

Radix AM is a start-up company, with less than a year of operation as a standalone entity. However, the manager has been able to leverage the track record/established brand of Radix Capital Partners Limited, which spans over a decade as a capital market operator and portfolio manager. Radix AM is led by a professional who has about two decades of experience in the industry (particularly in investment and portfolio management roles) and supported by other experienced professionals in the industry.

Although the manager commenced operations with fund under management (“FUM”) being largely funds of its parent and assets of other members of the Radix Group “the group” (comprising a trustee and a pension fund administrator). The manager in its first seven months of operation reflects a significant improvement in FUM from N6.4bn at FY18 to N27.9bn at July FY19, secured through private institutional clients and few high net worth individuals. As such, FUM is currently managed within the established trust deed and/or regulations surrounding the assets or are placed in treasury bills, with only proprietary funds currently being managed on discretionary basis. Overall, portfolio management mechanism is considered satisfactory for the current scope of operation, although the scope of Radix AM’s company-wide investment policy is considered limited as there are no asset allocation policies for the discretionary funds yet. According to management, the document will be updated and/or amended as the need arises.

Shareholders’ fund stood at N154.9m at July FY19, displaying a slight buffer above the required minimum of N150m for the sector. For the initial seven months of operations to July 2019, the company reported a net fee and commission income of N10.3m and an operating expenses of N6.9m (comprising mainly administrative expenses and staff costs), which saw the pre-tax profit to N3.4m. Going forward, a successful launch of the planned collective scheme to the public/market is expected to strengthen its financial condition over the short to medium term.

Though risk management function is performed at the group level, a risk management policy has been put in place for Radix AM which is considered satisfactory. The scope of the policy covers the process for risk identification, monitoring, measurement and management to be in line with set appetite and limit by the board. However, internal control and compliance function is considered to be limited, as the compliance officer currently reports to the MD/Senior management, limiting its independence.

The manager’s ability to successfully launch its funds/ products in the market, which is expected to improve its market share and competitive capacity. Also, asset retention capacity and profitability of Radix AM may be positively considered. However, a significant decline in key clients, weakening in risk management assessment and financial performance may result in a rating downgrade.

*Note that manager quality ratings are classified as non-credit ratings (refer to published rating scales and definition).

NATIONAL SCALE RATINGS HISTORY

Initial/last rating (November 2019)

Manager quality rating: BBB-(NG)(mq)

Outlook: Stable

ANALYTICAL CONTACTS

Primary Analyst

Funmilayo Abdulrahman

Senior Credit Analyst

funmilayo@globalratings.net

+234 1 904 9462-3

Committee Chairperson

Dave King

king@globalratings.net

APPLICABLE METHODOLOGIES AND RELATED RESEARCH

Global Criteria for rating Banks and Other Financial Institutions, updated March 2017

Glossary of Terms/Ratios, February 2016

RATING LIMITATIONS AND DISCLAIMERS

ALL GCR CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS, TERMS OF USE OF SUCH RATINGS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS, TERMS OF USE AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://GLOBALRATINGS.COM.NG/UNDERSTANDING-RATINGS. IN ADDITION, RATING SCALES AND DEFINITIONS ARE AVAILABLE ON GCR’S PUBLIC WEB SITE AT HTTP://GLOBALRATINGS.COM.NG/RATINGS-INFO/RATINGS-SCALES-DEFINITIONS. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. GCR’S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE AT www.globalratings.com.ng

SALIENT FEATURES OF ACCORDED RATINGS

GCR affirms that a.) no part of the rating was influenced by any other business activities of the credit rating agency; b.) the rating was based solely on the merits of the rated entity, security or financial instrument being rated; c.) such rating was an independent evaluation of the risks and merits of the rated entity, security or financial instrument; and (d) the validity of the rating is for a maximum of 12 months, or earlier as indicated by the applicable credit rating document.

The rating was solicited by, or on behalf of, Radix Asset Management Limited, and therefore, GCR has been compensated for the provision of the rating.

Radix Asset Management Limited participated in the rating process via face-to-face management meetings and other written correspondence. Furthermore, the quality of information received was considered adequate and has been independently verified where possible.

The rating above was disclosed to Radix Asset Management Limited with no contestation of/changes to the rating.

The information received from Radix Asset Management Limited and other reliable third parties to accord the rating included the seven- month unaudited management accounts of Radix Asset Management Limited as at 31 July 2019. In addition, other information specific to the rated entity and/or industry was also received.

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ALL GCR CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS, TERMS OF USE OF SUCH RATINGS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS, TERMS OF USE AND DISCLAIMERS BY FOLLOWING THIS LINK:HTTP://GCRRATINGS.COM. IN ADDITION, RATING SCALES AND DEFINITIONS ARE AVAILABLE ON GCR’S PUBLIC WEB SITE AT WWW.GCRRATINGS.COM/RATING_INFORMATION. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. GCR's CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THIS SITE.

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