Survey of Credit Rating Methodologies of Mutual Funds: Standard and Poor’s and Moody’s

Guha Niyogi, Gargi and Mandal, Nivedita and Das, Rituparna (2019): Survey of Credit Rating Methodologies of Mutual Funds: Standard and Poor’s and Moody’s.

Abstract

Credit rating literature attracted attention of academics since the subprime crisis 2008. In the wake of the crisis hundred billion dollars’ worth securities that were awarded AAA rating by the world’s leading credit rating agencies downgraded to junk. So is the survey on credit rating methodology. This work intends to survey the methodologies Moody’s and S&P follow in assessing the performance of equity funds and debt funds. The authors conclude that in these rating methodologies of S&P and Moody’s the link between equity fund and debt fund, i.e. how downgrade of debt fund can lead to downgrade of equity fund is not captured. Secondly Moody’s shakes off or manages the risk of loss of goodwill in the wake of failure of short term debt fund rating in the case of certain systemic factors like suspending or discouraging withdrawals and redemptions, by prescribing automatic downgrade to junk.

• Item Type: MPRA Paper
• Language: English
• Keywords: net asset value, expense ratio,asset management, fund credit quality rating, assets under management, funds risk
• Subjects: G - Financial Economics > G2 - Financial Institutions and Services > G23 - Non-bank Financial Institutions ; Financial Instruments ; Institutional Investors; G - Financial Economics > G2 - Financial Institutions and Services > G24 - Investment Banking ; Venture Capital ; Brokerage ; Ratings and Ratings Agencies

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