Moody’s Junks I-Grade Ratings For Hedge Funds

Apr 16 2007 | 11:25am ET

Investing in hedge fund firm-issued bonds may be just as speculative as having those firms manage your money in their funds, according to Moody’s Investor Service. The rating agency, which is set to begin rating hedge fund Citadel Investment Group’s debt, warned it’s going to be tough for alternatives firms to earn coveted investment-grade status.

“Our view is that investment grade ratings are possible, although the typical structural and operational features of a hedge fund make achieving one very challenging,” Moody’s said in a report issued this month. “Despite some convergence, the orientation and structure of hedge funds remain materially different from those of securities firms and asset managers, or even structured investment vehicles.”

The firm said it looks for diversification, operational quality, redemption limits and liquidity management, among other things, in determining a bond’s investment-grade bona fides.

Citadel issued $500 million in five-year notes in December, which have already been deemed investment-grade by Fitch Ratings and Standard & Poor’s, though the latter awarded it only a triple-B rating, the lowest investment-grade rating.


In Depth

Steinbrugge: Top 10 Hedge Fund Industry Trends for 2017

Jan 3 2017 | 9:03pm ET

Each year, Agecroft Partners' Don Steinbrugge predicts the top hedge fund industry...

Lifestyle

'Tis the Season: Wall Street Holiday Parties Back In Fashion

Dec 22 2016 | 9:23pm ET

Spending on Wall Street holiday parties has largely returned to pre-2008 levels...

Guest Contributor

DarcMatter: The Top Trends in Alternative Investments for 2017

Jan 13 2017 | 8:22pm ET

The $7 trillion alternative investments industry is poised for continued growth...

 

From the current issue of

The U.S. Commodity Futures Trading Commission (CFTC) ordered The Goldman Sachs Group Inc., and Goldman, Sachs & Co. to pay a $120 million penalty for attempted manipulation and false reporting of ISDAFIX Benchmark Rates, a global benchmark for interest rate products.