Industry Sees HF Ratings As A Good Thing

Date: Friday, August 25, 2006
Author: Institutional Investor Daily-Hedge Funds

Hedge fund risk ratings, to be introduced by Standard & Poor’s by year’s end, with systems by other firms in development, are being called a good thing for the industry. Emma Mugridge, director of the Alternative Investment Association, told Global Pensions that the ratings are “a natural progression for the hedge fund industry, which has become increasingly mainstream.” The ratings also reflect an industry that is becoming more conservative in an effort to satisfy the main source of new funds – institutional investors. Philippe Bonnefoy of Cedar Partners said in a Global Pensions interview that the ratings will help attract those cash-heavy investors, which he says should “take comfort” in having a manager or fund rated and evaluated as they prefer to retain HF firms with a “robust” infrastructure, as opposed to retail HF investors, who tend to pick funds that can produce the best returns. The ratings, says Global Pensions, should also make the Securities and Exchange Commission happy. After all, the SEC may have lost its bid to control hedge funds through registration, but hedge funds most likely will do their best to ensure a good rating.