Guest post from Jonathan Rochford, CFA, Portfolio Manager Narrow Road Capital Pty Ltd
With the potential for a downgrade in the credit rating of Australia, and the recent downgrade of the United Kingdom there’s been a spike in interest in credit rating opinions. Whilst many speak of the desire for Australia to retain the coveted “AAA” rating few understand what actually goes into a credit rating. So what is a credit rating and is it worth anything anyway? Should investors pay attention to these opinions particularly after the poor performance of rating agencies in the financial crisis? What do rating agencies do well and do badly?
