MoodyÂ's Investors Service has announced the global launch of a new rating system for private and public real estate funds.
This new system, called MoodyÂ's Real Estate Fund Ratings, is designed for commingled open-ended and closed-ended funds, unit trusts, partnerships, joint ventures and similar funds that invest in real property and/or mortgages on real property. The product is designed to boost transparency and to allow for increased investor confidence in the industry.
'We are pleased to provide this new rating system to the global real estate community,' says John J. Kriz, managing director of real estate finance at MoodyÂ's. 'The marketÂ's excellent reception has clearly delivered the message that MoodyÂ's Real Estate Fund Ratings will be important to fulfilling the needs of investors, consultants and investment managers for an independent, transparent and respected rating system for property fundsÂ' asset quality and management quality.'
The ratings will also assist investors and consultants in meeting their fiduciary responsibilities.
MoodyÂ's is the first rating agency to provide ratings to real estate funds, following its assignment of ratings to seven German property funds this March. MoodyÂ's uses its well-developed interdisciplinary analytical framework in determining Real Estate Fund Quality Ratings.
'MoodyÂ's unique combination of global expertise in evaluating fund managers, and knowledge of international real estate markets, provides the skills crucial to derive meaningful opinions for real estate fund investors, pension fund consultants and fund managers,' says Arlene Isaacs-Lowe, senior vice president of real estate finance at MoodyÂ's. 'MoodyÂ's international brand recognition and reputation will enhance the comparability and transparency of these investment structures across global markets.'
MoodyÂ's was recently appointed the exclusive rating agency for the evaluation of German open-ended real estate funds. This prestigious appointment was made jointly by the Association of German Investment and Asset Management Companies (BVI Bundesverband Deutscher Investment- und VermÃ¶gensverwaltungs-Gesellschaften e.V.) and the German open-ended real estate fund managers, based on their view that the assignment of MoodyÂ's ratings for these funds will provide additional, crucial transparency for the investment community.
The German open-ended real estate fund market exceeded â‚¬55 billion in 2001, as investors have favored German funds as a safe haven from volatile equity markets. The focus on property funds is currently at an all-time high as a result of turbulent equity market conditions worldwide.
'We are honoured that our Real Estate Fund ratings have been chosen by the German fund community,' says David Vriesenga, MoodyÂ's European-based representative director in the rating agencyÂ's mutual fund group.
MoodyÂ's Real Estate Fund Rating is comprised of two components -- Management Quality and Portfolio Investment Quality.
The Management Quality Rating assesses the overall quality of the organization, management abilities, capacity of the firmÂ's infrastructure, operational procedures, risk management and controls, financial wherewithal, and quality of client servicing.
The Investment Quality Rating assesses the impact of macro- and micro-economic trends on real estate fundamentals, asset quality, portfolio quality, fund liquidity and performance.
Unlike traditional ratings, MoodyÂ's Real Estate Fund ratings do not address a fundÂ's ability to repay a fixed obligation, or to satisfy contractual financial obligations.
MoodyÂ's Real Estate Fund Rating definitions are as follows:
Management Quality Component
AaaMQReal Estate Funds rated AaaMQ are judged to be managed in an exceptional manner. This rating indicates an exceptionally strong management and control environment.
AaMQReal Estate Funds rated AaMQ are judged to be managed in an excellent manner. This rating indicates an excellent management and control environment.
AMQReal Estate Fun