MARC has published for public comment an exposure draft which sets out the rating agency’s proposed methodology for rating investment managers. The proposed methodology applies to investment or fund managers providing investment management services to clients in return for compensation. The rating framework accommodates a wide variety of investment management firm structures and business models, including smaller boutique portfolio management companies, larger fund management companies which exhibit greater scale and diversity in terms of asset classes managed and Shariah-compliant fund managers.
Investment Manager Ratings provide a relative assessment as to the quality of the investment or fund management company and its vulnerability to financial and operational failure. MARC’s evaluation is performed in the context of the investment manager’s size and complexity of its investment management activities. MARC’s Investment Manager Ratings are not credit ratings and are expressed on a different scale.
The five broad rating factors used to assess an investment manager are its (i) business model and corporate structure; (ii) governance and risk management practices; (iii) investment management process; (iv) performance and track record; and (v) financial profile. MARC’s analysis of a Shariah-compliant investment manager would also be driven by an evaluation of the same rating factors, but with appropriate adaptations to incorporate commonly accepted components of sound Shariah governance and best practices.
The investment manager will be assigned a score ranging from 1 (highest) to 5 (lowest) for each of the broad rating factors. Some rating factors are given more weight than others in arriving at the final rating which is assigned on a five-point rating scale ranging from ‘IMR1’ (Superior) to ‘IMR5’ (Inadequate).
MARC invites investment managers, investors and other interested parties to comment on the proposed methodology by August 28, 2015 and to send their comments to firstname.lastname@example.org. MARC will finalise the rating methodology following its review of market participants’ comments.