Reuters – Standard & Poor’s on Tuesday released enhanced criteria for rating hedge funds, a market segment expected to grow as investors and regulators press for greater transparency.
The updated criteria include more quantitative analysis and more focus on operational risk, including such issues as trade processing and risk management, said Tanya Azarchs, a financial institutions credit analyst at S&P.
S&P, a unit of the McGraw-Hill Cos. (MHP.N: Quote, Profile, Research), is the latest credit ratings agency to attempt to make inroads into the lightly regulated hedge fund industry, which has grown to include more than 8,000 funds and $1 trillion in assets.
Moody’s Investors Service, a unit of Moody’s Corp. (MCO.N: Quote, Profile, Research), last week completed its first public rating on the operations risk of a hedge fund, managed by Sorin Capital Management LLC.
Fitch Ratings, a unit of Fimalac SA (LBCP.PA: Quote, Profile, Research) has also said it is exploring the possibility of expanding its ratings in the hedge fund industry in response to market demand.
“The due diligence process to assess the riskiness of a hedge fund investment is extremely in-depth and extremely time-consuming,” said Azarchs. “So there is an efficiency to having a credible intermediary perform that, and it can be used by all.”
