MSCI and Moody's Launch Groundbreaking Risk Assessment Solution for Private Credit Investments

Introduction

On April 22, 2025, in Tokyo, MSCI Inc. and Moody’s Corporation announced a collaboration to develop the world’s first independent risk assessment service specifically for private credit investments. As the private credit market expands, there is an increasing need for unified standards and robust tools to help investors accurately assess and compare investment risks.

The Need for Transparency

With the evolving landscape of private credit, it is essential for investors to have access to reliable tools that facilitate clear evaluations of risk. This new solution aims to enhance transparency and strengthen asset allocation strategies in private credit investments. Investors rely heavily on accurate data to make informed decisions about their portfolios, thus making transparency a key element in this domain.

Comprehensive Data Database

MSCI is well-positioned with its extensive database, which includes high-quality data on over 2,800 private credit funds and more than 14,000 individual investment targets. This database will support the new risk assessment service, allowing for a unique approach to evaluating private capital. Moody's will incorporate its leading EDF-X model, renowned for its accuracy in credit scoring, into MSCI's private credit solutions.

EDF-X Model Insights

The EDF-X model helps provide insights regarding credit risks, presenting early warning signals for financial resilience among both public and private entities. By integrating Moody's evaluation techniques with MSCI's extensive data, this partnership aims at delivering an innovative third-party risk evaluation for private credit investments. Investors can use these assessments at both the company and facility level, making the metrics more intuitive and transparent.

Voices from Leadership

Rob Fauber, President and CEO of Moody's Corporation, emphasized the significance of this collaboration by stating, "As the private credit market evolves, investors seek reliable assessments to benchmark credit risks and enhance their investment decisions and portfolio monitoring." This partnership illustrates a commitment to delivering essential insights that will help market participants make well-informed choices.

Meanwhile, Henry Fernandez, Chairman and CEO of MSCI, highlighted the shifts caused by the rapid growth of the private credit market, calling attention to the pressing need for increased transparency, harmonized standards, and independent risk assessments. He expressed pride in the collaboration with Moody's to develop this innovative solution which aims to foster greater transparency and trust.

Distinction from Rating Services

It is important to note that this solution diverges from traditional credit rating services offered by Moody's Ratings, specifically tailored to issuers in the private credit market. This new service is positioned to provide an unprecedented level of insight, setting it apart from the existing services.

Conclusion

As the private credit market continues to thrive, the introduction of this independent risk assessment service by MSCI and Moody's marks a significant milestone. This collaboration is expected to enhance investee transparency and deliver a supportive framework for informed investment strategies within the private credit space. Upscaling transparency and adopting robust evaluation methodologies will provide investors with scientific backing, thus supporting more strategic decision-making as they navigate this expanding market.

For more information, MSCI offers insights and data that empower investors worldwide to understand the critical factors behind risk and return, fostering effective portfolio construction and management.