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Moody's issues report on fund governance

Global Credit Research - 23 Nov 2010

New York, November 23, 2010 -- Global trends in fund corporate governance practices are examined in a new special comment issued by Moody's Investors Service. The report focuses on the governance framework of money market funds domiciled the U.S., and certain UCITS funds domiciled in Ireland and Luxembourg.

During the financial crisis, the challenges of fund corporate governance became increasingly evident. In the illiquid market conditions, some fund boards had to make decisions on how to price securities with no markets while others were confronted with large unexpected redemptions.

Fund governance is a qualitative factor that Moody's takes into account when assigning ratings to fixed income funds and this factor has taken on greater prominence as a result of the crisis. "We incorporate our views on a fund's governance into our rating as it may be predictive of potential risks to investors," notes Kathryn Kerle, a Moody's Senior Vice President , and co-author of the report. "Serious deficiencies in fund governance, if not mitigated by other considerations, may have a negative impact on fund ratings."

The three categories the rating agency used to examine fund corporate governance in this report were: 1) board composition, 2) the adequacy of information available to board members, and 3) the level of engagement of board members.

In terms of board composition, U.S. fund boards were found to be significantly more independent relative to those of funds based in Europe, which is positive. In Europe, however, boards seemed to more familiar with fund management than the US, which is also an important aspect of board composition.

"Generally speaking, the U.S. has better fund governance but all three regions are moving in a positive direction in regards to corporate governance," stated Rory Callagy, a Moody's Vice President, and co-author of the report.

"A strong board, which includes a meaningful number of independent directors with relevant experience and are dedicated to the fund can make all the difference in a fund's performance," notes Kerle.

Moody's report, entitled "Fund Governance: Key Analytical Considerations and Implications" is available on www.moodys.com

NOTE TO JOURNALISTS ONLY: For more information please contact New York Press Information +1-212-553-0376; EMEA Press Information in London +44-20-7772-5456; Juan Pablo Soriano in Madrid +34-91-310-1454; Alex Cataldo in Milan +39-02-914-81-100; Eric de Bodard in Paris +331-5330-1020; Daniel Kolter in Frankfurt +49-69-707-30-700; Mardig Haladjian in Limassol +357-25-586-586; Alex Sazhin in Moscow +7 495 228 60 60; Petr Vins in Prague +4202 2422 2929; Tokyo Press Information +813-5408-4110; Hilary Parkes in Toronto +1-416-214-1635; Hong Kong Press Information +852-3758-1350; Hector Lim in Sydney +612 9270 8102; Luiz Tess in São Paulo +5511-3043-7300; Alberto Jones Tamayo in Mexico City +5255-1253-5700; Daniel Rúas in Buenos Aires +54 11-4816-2332 ext. 105; Leon Classen in Johannesburg +27-11-217-5470; Jehad el-Nakla in Dubai +971 4 237 9536; or visit our web site at www.moodys.com

Paris
Yaron Ernst
MD - Managed Investments
Global Managed Investments Group
Moody's France SAS
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

New York
Robert M. Callagy
Vice President - Senior Analyst
Global Managed Investments Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's Investors Service
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New York, NY 10007
U.S.A.

Moody's issues report on fund governance
No Related Data.

 

© 2013 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

 


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MIS, a wholly-owned credit rating agency subsidiary of Moody's Corporation ("MCO"), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MIS have, prior to assignment of any rating, agreed to pay to MIS for appraisal and rating services rendered by it fees ranging from $1,500 to approximately $2,500,000. MCO and MIS also maintain policies and procedures to address the independence of MIS's ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading "Shareholder Relations — Corporate Governance — Director and Shareholder Affiliation Policy."

 


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