The International Managed Fund Credit Ratings are an assessment of the overall credit quality of a mutual bond fund's or local government investment pool's portfolio. The ratings, which are stated using the same scale as International Long-Term Credit Ratings, are based on an evaluation of several factors, including the credit quality and diversification of assets in the portfolio, management strength, and operational capabilities.
Fitch Ratings Managed Fund Ratings are an assessment of the safety of invested principal and the ability to maintain a stable market value for the fund's shares. Ratings are based on an evaluation of several factors, including the credit quality, diversification, and maturity of assets in the portfolio, as well as management strength and operational capabilities.
The credit quality of a bond fund will be similar to the weighted average default probability of the portfolio of bonds in the fund. Therefore, the credit quality of the fund is similar to that of a similarly rated fixed-income instrument.
Bond fund credit ratings do not address any risk other than credit risk. In particular, these ratings do not address the risk of loss due to changes in market interest rates and other market conditions. Bond fund credit ratings do not comment on the adequacy of market price. Moreover, bond fund credit ratings do not address the extent to which fund expenses and costs might reduce distributions to shareholders. Managed fund credit ratings are complemented by volatility ratings.
In the case of countries with foreign and local currency sovereign ratings significantly below 'AAA', Fitch may provide National Managed Fund Credit Ratings. Such ratings are based on the same scale as that applicable to national long-term credit ratings, which excludes the effect of sovereign risk and which results in the assignment of a 'AAA' long-term credit rating to the "best" credit risk relative to all the issuers or issues in the same country. This will normally be assigned to all financial commitments issued or guaranteed by the sovereign state.
National Managed Fund Credit Ratings provide a relative assessment of the combined credit quality of a mutual bond fund's portfolio. Solely within the context of the country in question, the national rating assigned to a bond fund links its credit quality to the weighted average default probability of the portfolio of bonds in the fund. Thus, the credit quality of the fund is similar to that of a bond rated at the same level using the related national credit rating scale.
The ratings in question are not internationally comparable since each country has a national rating of 'AAA' assigned to the "best" credit available in that country and other credits are rated only relative to this "best" credit. Like national credit ratings, National Managed Fund Credit Ratings are denoted by the addition of the ISO country identifier suffix, represented for example, as 'AAA(mex)' in the case of Mexico.
