Moody's Investors Service last week unveiled a new service aimed at helping a burgeoning class of U.S. cash CDO equity investors - mostly hedge funds - track how well their investments are performing. The rating agency will begin providing monthly reports, called the Moody's Equity Score Report,' on such indicators as internal rate of return, dividend and yield distributions and the most recent year's equity payment. In the first release of this report, Moody's analysts found that emerging market CDO equity pieces yielded the highest returns compared to other asset classes, while high yield CBOs were more likely to disappoint their investors.
"If someone is looking to invest in CDO equity going forward, I think that until now, they haven't really had a comprehensive data set to benchmark their prospective returns - those that are being promised and marketed," said Moody's vice president Natasha Chen. So far, the Moody's data does not incorporate factors influenced by market value, such as purchase price and liquidation value. While investors will need to factor in the information themselves, Moody's is planning to bulk up its equity data over time to include a deal score for each equity tranche, par and interest coverage test data and reason for deal termination. The rating agency also plans to reveal the names of every deal that it tracks.