NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed the 'AAAmmf' rating assigned to The Milestone Treasury Obligations Fund, a money market fund managed by CLS Investments, LLC.
KEY RATING DRIVERS:
The main drivers of the rating affirmation are:
--The fund's investment guidelines mandating credit quality, diversification and short maturity profile;
--Minimal exposure to interest rate and spread risk;
--The capabilities and resources of CLS Investments, LLC as investment advisor.
The 'AAAmmf' money market fund rating reflects the fund's strong capacity to achieve its investment objective of preserving principal and providing shareholder liquidity through limiting credit, market and liquidity risks.
FUND OBJECTIVE
The fund seeks to maximize current income to the extent consistent with preservation of capital and liquidity and the maintenance of a stable $1.00 per share net asset value. As of April 12, 2013, the fund had $256 million in assets under management.
CREDIT QUALITY AND DIVERSIFICATION
The fund pursues its objective by investing principally in U.S. Treasury bills, notes and bonds and repurchase agreements backed by such securities. The fund also may invest in shares of other money market funds with similar investment guidelines. At the time of the rating assignment there were no investments in other money market funds. Consistent with Fitch's 'AAAmmf' rating criteria, the fund seeks to maintain a high credit quality by transacting exclusively with counterparties rated at least 'A/F1' by Fitch or equivalent. In line with the same criteria, the fund limits its exposure to individual repurchase agreement counterparties to 25% of their total assets, on a fully collateralized basis. Fitch views these investment policies as consistent with Fitch's 'AAAmmf' rating criteria.
MARKET RISK AND LIQUIDITY
Consistent with Fitch's 'AAAmmf' rating criteria, the fund seeks to manage its market risk exposure by limiting its weighted average maturity (WAM) and weighted average life (WAL) to 60 and 120 days, respectively.
The fund also manages its liquidity by investing at least 10% of its total assets in securities maturing overnight or other qualifying assets such as U.S. Treasuries and at least 25% of its total assets in securities maturing within seven days or other qualified assets. As of April 12, 2013, the fund fully met these liquidity requirements.
INVESTMENT ADVISOR
CLS Investments, LLC serves as the investment advisor to the fund and as such directs the management of the fund's investment portfolio as well as its business affairs. CLS Investments, LLC is a subsidiary of NorthStar Financial Services Group, LLC. CLS, with USD3.81 bilion in AUM and 76 employees, acts as a third party asset manager for other financial planners.
CLS Investments, LLC's investment advisory capabilities, operational controls, corporate governance, and compliance procedures are consistent with the rating assigned to the fund, in Fitch's opinion. The administrator of the fund is Gemini, an affiliate of NorthStar, and the custodian is Bank of New York Mellon. Fitch views the role of the investment advisor with respect to financial support as less critical in the case of U.S. Treasury and government funds where the risk of credit and liquidity events is less significant.
RATING SENSITIVITY AND SURVEILLANCE
The rating may be sensitive to material changes in the credit quality or market risk profiles of the fund. A material adverse deviation from Fitch guidelines for any key rating driver could cause the ratings to be lowered by Fitch. Furthermore, given the primary investment focus on U.S. government securities, the rating may be sensitive to material adverse changes in the U.S. government's financial condition and that of the broader U.S. economy.
Fitch receives weekly fund holdings information and other pertinent fund data from the fund administrator to conduct surveillance against ratings guidelines and maintain its money market fund ratings.
For additional information about Fitch money market fund rating criteria, please review the criteria referenced below, which can be found on Fitch's web site.
Additional information is available at www.fitchratings.com.
The sources of information used to assess this rating were the public domain and CLS Investments, LLC.
Applicable Criteria and Related Research:
--'Global Money Market Fund Rating Criteria', March 26, 2013.
Applicable Criteria and Related Research
Global Money Market Fund Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=704145
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=790724
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