Following US Downgrade, S&P Reduces Credit Quality for 73 Funds Over Treasury Exposure

(August 9, 2011) — Standard & Poor’s Ratings Services has reduced its credit quality ratings for 73 funds that hold US debt.

The impacted funds include those managed by BlackRock Fund Advisors, State Street Global Advisors, Federated Investors, Franklin Advisers and Goldman Sachs Asset Management, as well as the City of Anaheim Treasurer Investment Pool, City of Los Angeles General Pool, Illinois Metropolitan Investment Fund, City of Houston General Investment Pool and the Florida Local Government Investment Trust.

S&P’s actions come after it downgraded the nation’s long-term rating for the first time, affirming the rating agency’s position that “there is a one-in-two chance that we would lower the ratings (on the funds) over the next 90 days by up to two notches.”

In a statement, the S&P noted that the portfolios of the funds include fixed-income funds, exchange-traded funds, hedge funds, as well as local government investment pools and unit investment trusts. According to S&P, it lowered the ratings on 73 of 206 funds managed in the US, Europe and Bermuda as a result of their “significant exposures,” greater than 50% to direct or indirect investments, in US Treasury and US government agency securities.

Read the S&P’s full report on why it lowered the US’ long-term rating to ‘AA+’ based on political risks and rising debt.