Rating agency Fitch has introduced a new rating instrument called volatility ratings for money market funds. Volatility ratings are expressed on a scale of 'V1+' (least volatile) through V10 (most volatile). | |
| The V1+ rating is assigned to money market funds that would not experience loss of principal value to shareholders or participants in adverse interest rate environments. |
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| However, the rating agency said that volatility ratings do not predict the direction or magnitude of changes in such market conditions and, therefore, do not predict the extent to which, any particular bond fund will perform favourably or adversely in the future. |
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| Funds rated V1+ (ind) are considered to have the lowest market risk. The rating is assigned only to money market funds that will not experience loss of principal value to shareholders or participants even in severely adverse interest rate environments. |
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| Funds rated V1 (ind) and V2 (ind) are considered to have low market risk. Funds that offer low risk exposure to interest rates and changing market conditions would fall under this category. Funds rated V3 (ind) and V4 (ind) are considered to have moderate market risk. |
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| Total returns perform consistently over intermediate to long-term holding periods but will exhibit some variability over shorter periods due to greater exposure to interest rates and changing market conditions. |
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