Thursday, December 21, 2006

S&P Rating Hedge Fund Op Risk

Given that the SEC hedge fund regulation story is waning fast....

Hedge funds may have a new incentive to voluntarily improve their operational risk story after getting wind of this effort by S&P ..... besides the obvious benefits of additional capacity and business scalability that investment in reducing op risk can yield.

How will prospective investors use these ratings to guide their investment decisions?

How will this impact the current composition of hedge fund performance indices?

When combined/weighted with AUM and general strategy info, I wonder if these ratings can be aggregated across funds to better estimate systemic risk?