Fearful of how a change in ratings will help them market their funds among investors, money fund managers are chafing at the idea of Moody’s’ proposed new ratings. Investors are used to looking for AAA-rated money market funds, and it will take some time for them to get to a scale ranging from MF1 to MF4, money managers tell The Wall Street Journal.
“These proposals are going down [among fund companies] like a lead zeppelin,” said Peter Crane, founder of Crane Data. “Tweaking the ratings criteria is one thing, but moving away from AAA ratings is sacrilege. It will take years or decades to condition people to this new system.”
Dan Serrao, senior vice president at Moody’s global managed investments group, said: “There are risks that are unique to money market funds, and we’re looking to provide additional information for investors.”
The credit crisis subjected money market funds to “significant stresses that the sector had not previously experienced,” Moody’s said, pointing to Lehman Brothers’ insolvency, the collapse of the Reserve Primary Fund and the inability of 30 other funds to meet redemptions in September 2008. Thus, the new scale looks at such key factors as asset profile, weighted average maturity and obligor concentration. The ratings scale also takes into account a fund’s sensitivity to interest rate shifts.