The fund ratings units of NRSROs have been busy recently. Moody's quietly downgraded two "enhanced cash" funds last week, and issued an extremely rare money market fund downgrade. The company also began rating a number of variable rate demand preferred (VRDP) issues. S&P also issued two London-based AAAm principal stability, or money fund, ratings last week.

In one of the first actions apparently based on the depth of the advisor's pockets, Moody's downgraded the rating on Resolution Liquidity Funds' Euro, USD and GBP shares, formerly the Abbey Liquidity Funds, from Aaa/MR1+ to Aa/MR1+. Moody's release says, "[T]he rating action is primarily driven by the agency's view that the investment advisers money market funds investment processes and credit personnel have only recently been introduced, coupled with the inability of the agency, given the absence of financial data, to adequately assess the financial profile of RAM's parent, Pearl Group or related entities." Moody's Christos Costandinides, says, "The lack of transparency with regard to RAM's parent, Pearl Group, prevented Moody's from fully assessing the parent company's ability to provide financial support to each of the firm's stable GBP1.00, USD$1.00, EUR1.00 net asset value (NAV) funds, should it become necessary in the future."

Moody's also downgraded Lehman Brothers Enhanced Libor Fund's "market risk rating" from MR1 to MR3, and downgraded the variable-NAV, Luxembourg-domiciled, and London-based Legg Mason USD Dollar Money Fund's MRR from MR1 to MR3. The fund's Aaa and Aa ratings, respectively, remain unaffected. Moody's says of the Lehman fund, "The downgrade of the fund's market risk rating reflects the relatively higher level of volatility that the fund's net asset value (NAV) may continue to experience due to current market conditions and the fund's exposure to ABS securities, largely Home Equity ABS and CMBS." It says of the Legg fund, "The Fund has been managed as a variable net asset value enhanced cash portfolio. Moody's observes that recent changes in the Fund's portfolio duration profile and structure as well as volatile market conditions in mortgage asset-backed markets have led to a reclassification of the Fund, under Moody's rating guidelines, from (non-CNAV) 'money market fund' to (short duration) 'bond fund'."

Moody's also rated a number of new money fund eligible, auction rate replacement Nuveen Variable Rate Demand Preferred Shares (VRDPs) P-1. Finally, S&P recently rated U.K.-based `St. James's Place Cash Unit Trust AAAm and Ethias Euro Liquidity Fund Acc, a subfund of Robeco Liquidity Funds AAAm. The St. James's Place fund will be managed by State Street Global Advisors (SSgA).

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