Moody’s KMV eyes move into alternative investments

Moody’s KMV is looking to expand into new asset classes, with private equity and other alternative investments, along with equities, topping the priority list, according to the credit risk management company’s its new chief executive Doug Woodham.

Fund sponsors and fund managers are increasingly looking "to better understand the risks they are taking [in alternative investments] and be able to communicate those risk positions to the ultimate owners of those assets in new ways”, Woodham told RiskNews.But Woodham added that offering risk metrics in the heterogeneous world of alternative investments would not prove easy. “It is a very complicated market to enter. But it is an asset class that is large and growing, and perhaps lends itself to more tailored quantitative tools,” Woodham said.

Woodham, who is also head of business development at Moody’s – which bought KMV in April last year for $210 million – declined to elaborate further on specific plans, but added that no deal was imminent. He said there were limited growth opportunities for the rating entity except for some narrow geographical expansion. “But most of that [has been achieved] through joint ventures and alliances that have already been put in place.”

Woodham said a lot of Moody’s organic and acquisition growth would be related to the Moody’s KMV entity, which he took charge of earlier this month. While declining to name possible targets for acquisition, Woodham said the integration of existing products to help clients understand, measure and monitor credit risk with regard to Basel II – the new set of international capital rules due for implementation in late 2006 – would be a priority this year.