The Private Use of Credit Ratings: Evidence from Investment Mandates
42 Pages Posted: 16 Jul 2018 Last revised: 14 Sep 2018
Date Written: June 22, 2018
Investment mandates are a key contractual mechanism underlying delegated asset management. Mandates of fixed income funds frequently refer to credit ratings to circumscribe the investment opportunity set of fund managers. To determine whether there has been a change in the perceived value of ratings, we examine changes in the use of credit ratings in investment mandates contained in fund prospectuses. Overall, the use of credit ratings in fixed income mandates has not declined during the 1999 to 2017 period. Fixed income markets’ extensive and continued reliance on credit ratings points to a lack of practically useful alternatives.
Keywords: credit ratings, investment mandates, financial crisis
JEL Classification: G24, G23, G01
Suggested Citation: Suggested Citation