Global rating agency Moody's Investors Services plans to partially outsource certain services including monitoring of mutual funds of Europe and emerging economies, from Indian rating agency ICRA.
An agreement has already been signed by Moody's and ICRA in this regard.
Confirming the move, ICRA managing director P K Choudhury told PTI: "Moody's has entered into an arrangement with ICRA for monitoring mutual funds of other countries."
The move assumes significance in the light of financial giant's plans of outsourcing their back-office jobs from India.
Major banks like HSBC, Citibank and American Express had set up developmental centres in India.
Although Choudhury did not elaborate, indications are that Moody's too intends to outsource a major portion of back-office jobs from India.
Moody's has already decided to start rating of Indian mutual fund jointly with ICRA from July.
ICRA and Moody's Milan (Italy) office is currently working together on this project.
The grading would be an opinion on the relative past performance of a mutual fund and the various factors that can influence its future performance, Choudhury said, adding it would not comment on the prospective returns.
Initially, the rating would be done for debt, money market, gilts and bond funds. Moody's-ICRA would offer performance grading denoted by 'mf', Credit Risk grading 'mfC' and Market Risk Grading 'mfM'.
The international rating agency has already assisted ICRA in launching jointly the Moody's-ICRA Mutual Fund Management Style Categories and Indices.
Commenting on the proposed mutual fund rating, Choudhury said it would facilitate investors to take an informed investment decision.
The grading would highlight the relative performance, credit quality and sensitivity of the scheme to changes in interest rate and quality of fund management and operations.
The ratings would be similar to that assigned to debt rating. Thus, a 'mfAAA' rated mutual fund would imply highest credit quality while 'mfB' would indicate poor quality mutual fund scheme.
Similarly, a 'mfM1' rate scheme would imply that the mutual fund is least sensitive to changes in interest rates and other market conditions, while a 'mfM5' would indicate very high sensitivity.
Choudhury said the Moody's-ICRA grading would help market intermediaries in offering products matching the specific return risks preferences of investors.
It would also assist agents to differentiate various schemes and enhance marketability of the funds, he said.
"The grading will also help asset management companies to benchmark their performance," he added.