Announcements Criteria

GCR requests Public Comments on Draft Criteria for Funds Rating and Criteria for Management Quality Ratings

Download: Proposed Criteria for Management Quality Ratings

Download: Proposed Criteria for Fund Ratings

GCR Ratings – Johannesburg, 11 June 2020, GCR Ratings (“GCR”) has published draft criteria for fund ratings & criteria for management quality ratings.

The following criteria are open to public comment until the 10th of July 2020.

Request for Comment: Criteria for Fund Ratings.

The proposed criteria titled ‘Criteria for Fund Ratings’ predominantly applies to fixed income funds, including money market funds and other funds with portfolios that invest primarily in debt and debt like securities. Fund ratings (“f”) are not credit ratings. Therefore, they do not measure the relative ability of a fund to repay principal and/ or interest in a timely manner. Rather, Fund Ratings indicate an opinion regarding the fund’s ability to preserve principal value under varying market conditions that may be affected by credit risk, interest rates, liquidity, as well as other market conditions.

The ratings balance quantitative factors with qualitative assumptions and are expressed in the form of a scale ranging from ‘AAA’ (highest quality and lowest volatility) to ‘C’ (material loss of principal).

The proposed criteria is based on the principles of the ‘Global Master Criteria for Rating Funds and Asset Managers, last updated in March 2017’. The major proposed change to the criteria is the separation of the ‘management quality’ or ‘mq’ ratings from the Fund criteria. The other major change for the Fund Rating Criteria is its alignment to the broader GCR Ratings Framework, published May 2019. Specifically, GCR has adopted the use of the GCR risk scores in ascertaining portfolio quality and deriving national and international scale ratings. Furthermore, in line with the framework, GCR have significantly improved the transparency of the criteria and adopted the Anchor Credit Evaluator mapping table. See the Criteria for the GCR Ratings Framework for more details on how the framework, risk scoring and Anchor Credit Evaluator works.

GCR anticipates a negligible impact on the rating levels of fund ratings, should the criteria be adopted.

Request for Comment: Criteria for Management Quality Ratings.

The proposed criteria titled ‘Criteria for Management Quality Ratings’ has been extracted from the ‘Global Master Criteria for Rating Funds and Asset Managers, last updated in March 2017’, with minimal changes. However, the management quality ratings scale and definitions were changed last year within the ‘GCR Ratings Scales, Symbols and Definitions’ article, published May 2019.

Management quality (‘mq’) ratings provide institutional investors with an independent appraisal of asset management companies. MQ ratings are not credit ratings, therefore they do not measure the relative ability of an entity to meet its financial obligations. Typically, these ratings are only conducted outside South Africa.

GCR’s asset management ratings are intended to assist investors in comparing portfolio managers’ skill sets, and facilitate the process of evaluating investment management firms’ overall quality, regardless of size, ownership structure, and scope of operations. Although the assessment incorporates a review of the firm’s investment performance track record, the ratings are not intended to consider the prospective performance of specific funds managed by the company.

GCR invites comment on the draft criteria presented and welcomes comments which may be sent to RFC@GCRratings.com, prior to the closing of the comment period on the 10th of July 2020. GCR will continue to support all ratings on existing methodologies until the new criteria is adopted.

Analytical Contacts

Primary analyst

Matthew Pirnie

Group Head of Ratings

Johannesburg, South Africa

MatthewP@GCRratings.com

+27 11 784 1771

 

     
     

Related criteria and research

Criteria for the GCR Ratings Framework, May 2019

GCR Rating Scales, Symbols and Definitions, May 2019

Country Risk Scores, May 2020

Download: Proposed Criteria for Management Quality Ratings

Download: Proposed Criteria for Fund Ratings

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