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From The Opalesque Team:
Ratings agency Moody's notified the hedge fund industry of slight changes to the way it approaches rating funds. The Moody's Hedge Fund Ratings System does not reflect funds' investment performance, but evaluates several aspects of their operational structure. The last published announcement on the ratings approach was in 2006, and the agency cites the recent market turmoil and the development of best practice standards as the drivers behind the updated approach to evaluating funds.
"Moody's Operational Quality rating methodology details the key features that we consider in our assessment of operational risk in hedge funds and incorporates some of the items that are detailed in the standards of practice and research produced by AIMA, MFA, PWG and HFWG." says the update announcement." says the firm.
Ratings elements which have been refined and updated include: a scorecard to track the assessments of five key rating categories, weight changes to categories, and overweighting of factors where significant weakness is defined.
The core areas of scoring are operations, valuations, risk management framework (all three accounting for 70% of the score), and are rounded out by corporate functions (20% weighting) and third party service providers (10%). While parameters for scoring are clearly defined the firm notes that the qualitative judgment of Moody's analysts can adjust a fund's rating, "if they determine that the category...................... To view our full article Click here
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