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Rethink Credit Ratings: Strategies for Your Portfolio

Learn about the flaws in credit ratings, explore alternative strategies, and discover the impact on your investment portfolio. Gain insights from industry studies and the Lehman Brothers case study.

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Rethink Credit Ratings: Strategies for Your Portfolio

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Presentation Transcript

  1. The Courage to Innovate

  2. Rating Agencies, Indexes and Your Portfolio Your portfolio is built on stale and unreliable credit ratings Even your S&P 500 index fund S&P and Moody’s use issuer pay business model

  3. What We Hear “I hate S&P! Those guys are crooks! Have you read ‘The Big Short’?” -Premier Wealth Manager

  4. Government Studies • Financial Crisis Inquiry Commission • Senate Permanent Committee on Investigations: Credit Ratings • SEC Credit Ratings Firms Summary Report - 2008

  5. Academic and Industry Studies • CFA Institute • “Issuer Pays Ratings Model and Ratings Inflation • “Does the Bond Market Want Informative Credit Ratings?” • “Does Regulatory Certification Affect Information Content of Credit Ratings?” • “Credit Rating Firms Have Historically Been Harder on Sovereign Debt Than Corporate Debt”

  6. Lehman Brothers - 2008 Lehman Files for Bankruptcy September 14th 2008

  7. Lehman Brothers - 2008 AAA AA+ AA AA- A+ A BBB+ BBB BBB- BB+ BB BB- B+ B B- CCC+ CCC CCC- CC C D 5/28/08 9/23/08

  8. Credit Rating Age Indexes

  9. Number of Companies in Average

  10. Questions?

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