Unrated security

Unrated securities are common in private credit, private placements and small issues. A credit floor written only in ratings does not say what to do with them. Treating them as compliant by default hides risk.

A policy should choose its treatment in advance. The choices are to count them as below investment grade, exclude them, map them to an internal grade, or stop and investigate. A clause such as “unrated bonds count as below investment grade” settles it.

Acclimetry offers the same four choices, set by organisation policy or per rule. The default leaves the rule not evaluated; the others count the holding below the minimum, exclude it or map it to a grade. Example: an unrated holding of 100 in a 1,000 portfolio, counted below the minimum, is 10% and breaches a 5% cap (unrated holdings).