Fitch Ratings Assigns 'AAAf' Credit Quality Rating to NPAIT Term Series II

Strategic Insights -

The Nebraska Public Agency Investment Trust (NPAIT) Term Series II has been assigned a 'AAAf' International Fund Credit Quality Rating (FCQR) by Fitch Ratings, indicating the highest underlying credit quality. This rating reflects the fund's investment and credit guidelines, expected credit quality, and diversification, as well as the asset management capabilities of PMA Asset Management, LLC (PMA). The NPAIT Term Series II is a variable net asset value (NAV) vehicle that allows participants to invest in fixed-rate, fixed-term portfolios with a maximum maturity term of two years.

Key Takeaways:

  • The 'AAAf' FCQR assigned to NPAIT Term Series II indicates the highest underlying credit quality, reflecting the fund's strong investment and credit guidelines, expected credit quality, and diversification.
  • The fund's investment strategy is focused on preserving capital and providing a high yield while maintaining liquidity, with permitted investments including obligations of the U.S. government and its agencies, and commercial paper with a maturity less than 270 days.
  • The NPAIT Term Series II is managed by PMA Asset Management, LLC, which has demonstrated strong investment management capabilities and operational controls.
  • The fund's rating reflects Fitch's review of the model portfolio's credit quality, diversification, and asset management capabilities, as well as the investment policy and applicable Nebraska statutes.
  • Stress tests conducted by Fitch showed no material deterioration in the fund's credit quality, supporting the assigned rating.
  • The NPAIT Term Series II is open to Nebraska public agencies, including counties, cities, and school districts, and offers a range of investment options with a maximum maturity term of two years.
  • The fund's principal value may fluctuate before redemption, but the return of principal is guaranteed on the planned redemption date.
  • PTMA's investment management capabilities, resource commitment, operational controls, compliance, and oversight processes are viewed as appropriate for the assigned rating and investment strategy.

Statistics:

  • The model portfolio's weighted average rating factor (WARF) is 0.08, corresponding to a WARF-implied FCQR of 'AAAf'.
  • The fund's portfolio is allocated to U.S. Treasuries (50%) and commercial paper (50%).
  • The fund's maximum maturity term is two years, with investment options ranging from 60 days to 397 days.
  • The fund's principal value may fluctuate before redemption, but the return of principal is guaranteed on the planned redemption date.
  • PTMA has over $155 billion assets under administration.
  • The fund's rating reflects Fitch's review of the model portfolio's credit quality, diversification, and asset management capabilities.

Sources:

  • Fitch Ratings (2025) - "Bond Fund Rating Criteria"
  • Fitch Ratings (2025) - "NPAIT Term Series II Fund Credit Quality Rating"