Moody's Now Rating Hedge Fund Risk

Moody's Investors Service has begun rating the operational risk of hedge funds, beginning with Sorin Capital Management, The Wall Street Journal reports. The ratings takes into consideration a variety of factors, including back-office systems, hedges against sudden losses and executives' backgrounds. Moody's gave Sorin a rating one notch below its highest rating.

This is the first such type of service. In the past, a handful of hedge funds have obtained credit ratings but have not disclosed them. This new interest in obtaining ratings is most likely due to the increasing interest in hedge funds by institutional investors, known for being cautious investors.

In fact, this is why Sorin decided to obtain a rating, the company's chief executive officer, Jim Higgins, said. "There's definitely a strong desire from investors to understand and assess our operational quality," Higgins said.