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Global Credit Research - 23 Feb 2012
Buenos Aires, February 23, 2012 -- Moody's Investors Service has published its new methodology for
assessing equity funds that invest principally in common stock,
or in a combination of predominantly common stock and fixed-income
securities. This methodology would apply to the 13 equity and balanced
funds currently rated in Latin America, as well as to any equity
funds assessed in the future.
"The new methodology measures investment quality based on an assessment
of a fund's intrinsic characteristics and its asset manager attributes
," says Yaron Ernst, Managing Director of Moody's
Managed Investments group. "Each of these two components
will account for half the maximum achievable score."
The new methodology also includes a new symbol set with assessment definitions
in the form of EF-[n], on a scale ranging from EF-1
to EF-5, to differentiate from the rating agency's
traditional credit ratings on long-term debt obligations.
For the assessment of fund's intrinsic characteristics, the
new methodology will use three quantitative measures: (1) the Information
Ratio, measuring a fund's excess return (alpha); (2)
the Expense Ratio, measuring the percentage of annual fees over
assets under management, and (3) the Maximum Drawdown, which
measures a fund's largest loss over a specified period.
In addition, Moody's will incorporate an assessment of a fund
manager's quality and experience, which will complement the
performance assessment. This component of the analysis will largely
follow the guidelines outlined in "Moody's Approach to Investment
Manager Quality (MQ) Assessments of Asset Managers", published
in August 2011.
To maximize utility for investors, Moody's equity fund assessments
will be made in comparison to the fund's peer group, which
would include funds that invest according to a similar strategy (e.g.,
Argentine equities), rather than benchmarked against an absolute
standard.
The new methodology is described in more detail in "Moody's New
Methodology for Assessing the Investment Quality of Equity Funds",
which can be accessed at http://www.moodys.com/managedinvestments.
The new methodology is scheduled to become effective on March 9,
2012, and all existing equity and balanced funds ratings will then
be migrated to the new rating symbols based on the new methodology.
Carlos de Nevares
Asst Vice President - Analyst
Managed Investments Group
Moody's Latin America, Calificadora de Riesgo
Cerrito 1186, 11th fl
Buenos Aires C1010AAX
Argentina
JOURNALISTS: (800) 666 -3506
SUBSCRIBERS: (5411) 3752 2000
Yaron Ernst
MD - Managed Investments
Managed Investments Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Releasing Office:
Moody's Latin America, Calificadora de Riesgo
Cerrito 1186, 11th fl
Buenos Aires C1010AAX
Argentina
JOURNALISTS: (800) 666 -3506
SUBSCRIBERS: (5411) 3752 2000
Moody's finalizes new methodology for assessing equity funds
No Related Data.
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