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

Creating An Offshore Hedge Fund Dream Team: The Seven Key Players

Jun 26 2015 | 6:47am ET

If you want to set up an offshore hedge fund, like any great team, you’re only...

Lifestyle

Hedgies Set to Compete in Wall Street Decathlon

Jun 8 2015 | 12:37am ET

The Wall Street Decathlon — a 10-event physical challenge that will crown “Wall...

Guest Contributor

6 Essential Principles To Balance Your Investment Risk

Jun 26 2015 | 10:07am ET

In this article, financial expert Greg Silberman explores how to hedge a private...

 

Editor's Note