# Risk Metrics

Because Ondo funds currently provide exposure to a single ETF plus cash, Ondo sets its fund rating equal to its estimate of the underlying ETF credit rating. This in turn is determined by calculating the weighted average credit rating of the ETF's portfolio using the following procedure:

- Ondo obtains the distribution of credit ratings for the ETF portfolio from the ETF manager. Each fund page describes the ETF manager's methodology for generating the portfolio distribution of credit ratings from the portfolio of underlying credit obligations.
- Ondo then generates the weighted average default probability for the ETF portfolio using one-year default probabilities from DBRS Morningstar's idealized default probability table.
- Ondo converts the portfolio's default probability into an estimated credit rating from the same DBRS Morningstar table.

See the below table used for the calculating for the default probability for a hypothetical ETF as an example:

Credit Ratings | % of Assets held by ETF at the given credit rating (Source: ETF Manager) | DBRS Morningstar One Year Default Probability for Given Credit Rating (Source: DBRS Morningstar) | Weighted Portfolio One Year Default Probability (Calculation) |
---|---|---|---|

AAA | 20.00% | 0.011% | 0.00% |

AA+ | 0.00% | 0.016% | 0.00% |

AA | 15.00% | 0.021% | 0.00% |

AA- | 0.00% | 0.028% | 0.00% |

A+ | 0.00% | 0.042% | 0.00% |

A | 15.00% | 0.049% | 0.01% |

A- | 10.00% | 0.095% | 0.01% |

BBB+ | 0.00% | 0.186% | 0.00% |

BBB | 30.00% | 0.230% | 0.07% |

BBB- | 0.00% | 0.370% | 0.00% |

BB+ | 0.00% | 1.800% | 0.00% |

BB | 10.00% | 1.363% | 0.14% |

BB- | 0.00% | 2.235% | 0.00% |

B+ | 0.00% | 3.629% | 0.00% |

B | 0.00% | 4.850% | 0.00% |

B- | 0.00% | 10.077% | 0.00% |

CCC+ | 0.00% | 18.780% | 0.00% |

CCC | 0.00% | 22.270% | 0.00% |

CCC- | 0.00% | 61.130% | 0.00% |

Sum | 100.00% | 0.23% |