The Use of Credit Ratings in the Delegated Management of Fixed Income Assets

• 成果类型: Article
• 署名作者: Baghai, Ramin P.; Becker, Bo; Pitschner, Stefan
• 署名单位: Stockholm School of Economics; European Corporate Governance Institute; Centre for Economic Policy Research - UK; City University of New York (CUNY) System
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2023.4848
• 发表日期: 2024
• 关键词: credit ratings; investment mandates; Delegated asset management; Financial crisis

摘要

Investment mandates of fixed income funds constrain managers' portfolio decisions, often employing credit ratings to classify asset risk. We categorize U.S. and European fixed income funds' mandates using textual analysis and measure the use of ratings. Over the past two decades, despite the weaknesses of ratings revealed in the global financial crisis, ratings use has increased significantly. Since 2010, the fraction of funds not using ratings in any way has fallen by almost half in both the United States and Europe. By 2020, 94% of U.S. funds and 65% of European funds used ratings. These patterns fit agency based models of investment mandates and point to a lack of practically useful alternatives.