Investment Company Ratings: Assessing Credibility After the Financial Crisis

Investment company ratings grade the solvency and stability of those investment companies that interact with the public markets. The ratings come from a private organization such as Moody's or Standard & Poor's. These organizations suffered major public relations problems in the financial crisis of 2007-2008. Many people relied on the "A" ratings of certain investment houses only to find out the ratings did not match the balance sheets. There are two parts to the credibility of the ratings on the general market: the actual evaluations and the public image of those evaluations.

Evaluations

Moody's, Standard & Poor's and A.M.'s Best have followed the same criteria for rating investment companies and financial institutions for years. They employ accountants and analysts with a high degree of specialized knowledge. In this sense, the ratings still have credibility.

Public Image

A big part of the job of the institutions is to serve as an authority the public can trust. Due to the role they played in the recession of late 2007, these companies do not currently inspire a large amount of trust from the public. The result has been the total lack of ability for the public to trust any investment company, regardless of its rating.