As Alternative Investment Funds (AIFs) mature, greater transparency is needed. This is especially the case given the trend for some funds to access loans from banks and other financial institutions to boost their leverage. This increased leverage within the AIF universe poses potential credit risks to various counterparties that provide fund financing.
Identifying an AIF’s potential credit risks may be challenging, and a series of questions should be addressed to help better understand the financial strengths and weaknesses.
S&P Global Market Intelligence’s AIF Credit Assessment Scorecard is constructed to assist in analysing the specific risk factors relevant to AIFs. This includes such factors as concentration, market risk, funding and liquidity risk, and country-level issues. In addition, a good understanding of an AIF's investment performance track record, its internal governance and risk management practices, and the regulatory environment in markets in which it operates can further refine the analysis.