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

Dillon Eustace: The Advantages of ICAVs

Feb 11 2016 | 7:51pm ET

As the growth of alternative investment vehicles continues, global asset managers...

Lifestyle

Citadel's Ken Griffin Donates $40M To New York's Museum of Modern Art

Dec 22 2015 | 9:23pm ET

Citadel founder Ken Griffin has donated $40 million to New York’s Museum of Modern...

Guest Contributor

Hedging Against Reputational Risk in the 21st Century

Feb 12 2016 | 7:18pm ET

For investors, the first step in researching a new fund or manager is to google...