EUROPE – The head of UK fixed income at AXA Investment Managers has criticised ratings agencies for the way they rate companies based on their pension deficits.

Denis Gould said the ratings agencies should be careful how they phrase their comments on firms’ pension deficits.

“In particular we would like to see them being very careful with the tone of their statements, especially early in the development of a story when hard facts may be scarce,” he said.

Earlier this month Standard & Poor’s put ten European companies on credit watch as a result of their pension fund deficits. The companies cried foul, saying S&P’s analysis was not based on new information.

“The market will often assume that the rating agencies have more information than it does, and will read a strongly worded statement in this light,” Gould said. “An agency therefore needs to be careful how they express their views if they are not to become part of a downward spiral of credit problems.”

He did not dispute that the status of the pension fund can be important in determining a company's financial position. “We believe the rating agencies have a duty to take all factors into account when assigning ratings.”

But they have a duty “not to precipitate credit problems for companies”.

“Long criticised for being too slow to react, agencies have to be careful not to go too far the other way.”