LONDON (HedgeWorld.com)–Pioneer Global Opportunities plc was the first European hedge fund to receive a rating from Standard & Poor’s and only the third hedge fund overall to be rated by the agency.

Managed by Pioneer Alternative Investments, the fixed-income relative hedge fund offers both euro- and U.S. dollar-denominated share classes and is the first European managed fund to receive a credit quality rating from S&P. The first three funds to be assigned credit quality ratings were managed by New York-based Caspian Capital.

Peter Cripwell, along with co-managers Bernard Thompson and Richard Jarvis in Dublin, Ireland, handle the 382 million euro (US$420 million) PGO fund, assigned an AAf credit quality rating and an S4 volatility rating.

A seven-category credit quality scale ranges from AAAf to CCCf, and pluses and minuses are assigned to show relative standing in the rating categories. Volatility ratings are on a scale starting at S1 and moving up to the highest volatility at S6. Volatility is assessed by looking at the fund’s investment strategy and portfolio risk, including interest-rate risk, credit quality, liquidity, concentration, call and option risk and currency risk.

The AAf rating signifies that the fund possesses very strong protection against losses from credit defaults, while the S4 volatility rating shows that the fund’s share classes have moderate sensitivity to changing market conditions, according to S&P. An S4 rating means that the aggregate level of risk in each share class is less than or equal to a portfolio made up of government securities maturing beyond 10 years and denominated in the base currency of the share class.

“We believe hedge fund ratings will become increasingly important,” said David Hanratty, Pioneer Alternative Investments’ spokesman. The ratings will be of comfort to the investors less familiar with hedge funds, Mr. Hanratty added.

Gordon Wright, director of S&P Investment Services in London, said that no other hedge funds are in the pipeline to receive ratings, for which the investment firms pay a fee. The credit quality ratings are based on an analysis of the fund’s portfolio investments and strategy and historical return volatility and management. The review process in the case of Pioneer took three months.

The ultimate goal for S&P is to assign qualitative ratings to hedge fund strategies that would be inclusive of all hedge fund strategies. Until now, S&P rated structured notes that invested in hedge funds of funds. Man* Glenwood Alternative Strategies I, a structured hedge fund of funds, received ratings from both S&P and Moody’s for its US$374 million in debt tranches in June 2002 Previous HedgeWorld Story.

*Man Group plc is a minority investor in HedgeWorld.

SBarreto@HedgeWorld.com