Principal Stability Fund Ratings
Overview
When investing in short-term liquidity funds, stability of principal is typically at the foremost of an investor’s mind. Since 1984, S&P Global Ratings has assigned Principal Stability Fund Ratings (PSFR) to those fixed-income funds seeking to meet the objective of principal stability.
A PSFR also known as a ‘money market fund rating,’ is a forward-looking and independent opinion about a fixed-income fund's ability to maintain principal value (i.e., stable net asset value (NAV)) and limit exposure to principal losses due to credit risk.
The rating categories range from 'AAAm' (extremely strong capacity to maintain principal stability and to limit exposure to principal losses due to credit risk), to 'Dm' (failure to maintain principal stability resulting in a realized or unrealized loss of principal). PSFRs are identified by the 'm' suffix to distinguish it from an S&P Global Ratings traditional issue or issuer credit rating, which by comparison, reflects our view of a borrower's ability to fully and timely meet its financial obligations.
When assigning a PSFR to a fund, we focus on quantitative and qualitative areas, including:
- Credit quality, diversification, maturity, and liquidity of the fund
- The strengths and weaknesses of the fund's management including credit research, risk management and internal controls to limit exposure to loss
Our global team works in multiple languages, manages relationships across numerous time zones and employs meaningful and straight-forward access to experienced analysts.
We perform weekly surveillance on our PSFRs to form a view on whether any changes in the portfolio and management’s operating policies may alter the fund's credit profile and, therefore, the rating. S&P Global Ratings also conducts an annual management review to identify any changes in management, policy, strategy, and operations. During volatile market conditions, we typically enhance our standard surveillance to assess whether funds are maintaining the relevant fund metrics. Enhanced surveillance, which may include daily interactions with the investment advisors, is fundamental to our rating process during periods of market volatility.
Benefits
An independent opinion of the risks that could affect stability of principal
A robust, transparent methodology focused on factors that affect the fund's net asset value, including credit, counterparty, interest-rate, maturity and liquidity risks
Annual review meetings with our fund ratings analytical team
A comprehensive surveillance system with a dedicated team undertaking weekly monitoring of key fund metrics and portfolio holdings
An easily understood rating scale
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