Standard & Poor’s Rating Services announced that its Financial Institutions group has begun issuing enhanced ratings criteria for hedge funds, hedge fund managers, and hedge fund of fund managers to meet the rising demand for these ratings. Prompted by a need for greater transparency, the ratings include an assessment of operational and business risks.
Significant changes in the updated criteria consist of a greater focus on operational risk, including governance, legal, organizational, and back-office issues, as well as a greater emphasis on more in-depth quantitative analysis. Both public and confidential ratings can be provided.
“We are rating to default on the credit obligations of the hedge fund,” explained Tanya Azarchs, a financial institutions credit analyst at Standard & Poor’s, in a statement. “We are not offering an opinion on the future value of the shares in the fund or the creditworthiness of the assets within the fund. We will monitor performance of the fund as poor performance could increase business and liquidity risks.”
More about the enhanced criteria ratings is available here.