Summary
- Debt issuance outlook backstopped by re-financing requirements across Western capital markets and ongoing ratings adoption in emerging economies
- Attractive re-investment opportunities across the analytics business
- Strong pricing power underpinned by compelling customer value proposition
- Low capital requirements and conservatively managed
Background
Caledonia first invested in Moody’s in 2022 following a c.40% decline in its share price on the back of market concerns regarding the outlook for debt issuance amid a sharp Federal Reserve tightening cycle and Russia’s invasion of Ukraine. Despite this macro-economic volatility Moody’s has proved able to sustain significant top and bottom-line growth whilst continuing to invest across its business and delivering its customers best in class risk management solutions.
Investment thesis
Founded in 1909 and headquartered in New York, Moody’s is a leading global provider of credit ratings, research, and risk analysis. The business operates across more than 40 countries and serves institutional and corporate clients through its two core segments: Moody’s Investors Service and Moody’s Analytics.
Today over 95% of US and EU debt is rated by Moody’s in conjunction with one of the other ‘Big 3’ agencies (S&P and Fitch). The grades they assign are a key means via. which bond holders evaluate credit risk and have become deeply embedded in the processes of investors, creditors, advisors, indices and regulators.
Moody’s is set to benefit from secular growth in the nominal stock of rated debt driven by GDP growth, the ongoing disintermediation of bank lending by bond markets and wider ratings adoption across emerging economies. Further, the compelling value proposition of Moody’s core product offering and the wide network moat protecting its competitive position afford the company an extensive pricing runway. Moody’s capital light operating model and high incremental margin profile makes the economics of this growth highly attractive.
As at 31 March 2025.