Moody´s is first to develop and publish Real Estate Fund rating criteria

Responding to the property market´s needs

In a recently released report by Moody´s Investors Service, the rating agency is first to develop and publish a methodology for assigning real estate fund ratings, a new tool that provides property market participants with consistent and comparable measures of portfolio quality and the strength of the investment manager.

Moody´s has finalized its methodology based on significant market feedback, including input from pension fund investors, pension fund consultants, and investment managers. The ratings are available to a broad cross-section of real estate investment funds, including open-ended and closed-ended funds, separate accounts, opportunity funds, unit trusts, partnerships, and joint ventures.

A copy of the report 'Real Estate Fund Ratings: Enhancing Transparency and Comparability,' is available at under 'Rating Methodologies'.

Real estate funds in the USA, Europe and elsewhere have often been criticized for their lack of transparency, governance and structural discipline, as well as for the diversity of their accounting and performance measurement methodologies.

'The aim of Moody´s real estate fund ratings is to substantially reduce the level of investor concern about transparency by providing an independent and standardized approach to assessing the qualitative and quantitative aspects of real estate funds,' says Moody´s Senior Vice President Arlene Isaacs-Lowe.

Moody´s says that it will provide public or private assessments of management quality and investment quality at the request of a fund´s management. The rating agency will also provide an assessment of the investment manager alone, if requested.

'Analyzing management quality and portfolio quality separately allows for a reasonable and nuanced evaluation of funds,' says John J. Kriz, Managing Director of Moody´s Real Estate Finance Group. 'We believe that this approach provides investors and real estate professionals with a useful instrument for determining the most appropriate combination of these two components for their desired risk/reward appetite.'

Moody´s emphasizes that these ratings are not intended to compete with or substitute for the existing methods of evaluating whether a fund is appropriate for a specific investment allocation strategy.

'Our ratings have instead been designed to compare and contrast a broader universe of real estate funds across the risk/return spectrum and, as such, provide a new and useful tool for all property industry professionals,' says Mr. Kriz.

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(source: Moody´s)

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