Head of ABS Gaëlle Phillipe-Viriot says ABS investors see a rating as an additional risk to manage. She says: “It is difficult to trust the rating agencies. The main reason for a lack of confidence in ABS markets today is the rating uncertainty.”
Phillipe-Viriot says bigger managers such as Axa can do the extra due diligence on ABS themselves but smaller investors would struggle to do this.
She says: “For less sophisticated investors, especially those who have invested heavily at AAA level, to monitor and risk manage their portfolio properly, they would need to invest in additional resources because they cannot rely on the external ratings but it could too late for them to change their business.
“The market and the regulator want the rating agencies to have more transparency, to do more research, offer more clarity on how they make their decisions and provide more information that is easier to use.”
Evolve Financial Planning director Jason Witcombe says: “Ultimately, advisers should not judge a fund on a rating alone.”
A spokeswoman for Fitch Ratings says: “Credit ratings will continue to be one of many components in investors’ decision-making processes.”