Moody’s Tweaks Hedge Fund Ratings

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Another ratings agency is changing the way it looks at the hedge fund industry.  According to the Dow Jones Newswires, Moody’s Investors Services said it will now group its ratings into five categories and offer a ratings scorecard to make its methodology clearer.   

Moody’s decision follows Fitch Ratings’ earlier decision to change the way it gauges risk in the funds of hedge funds it rates.  Moody’s plans to distinguish the firm’s hedge fund ratings from its ratings of structured finance products, which are blamed in part for the magnitude of the financial crisis.

Currently, Moody’s rates just 20 funds from nine firms, with a total of $80 billion in assets under management.  Moody’s clients—who pay the firm for the ratings—are among the largest in the industry, including Brevan Howard Asset Management, Citadel Investment Group, Millennium Management and SAC Capital Advisors.

Now, Moody’s will use a “fundamentally different” approach for the few hedge funds it rates, focusing on governance, valuation and trading systems, and not taking into account a hedge fund’s performance or strategy.

Anna Timone (195 Posts)


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