The raters' disastrous record in evaluating the soundness of packages of mortgage-backed securities and other exotic financial instruments is well known.

FORBES: Fact and Comment

New, exotic financial instruments, such as credit default swaps, are being cast as one of the principal villains in the credit crisis.

FORBES: Our Cover Story

But much of that performance was based on investing in alternative assets, like hedge funds, leveraged buyout funds and other exotic financial instruments that plummeted during the recent financial crisis.

FORBES: Magazine Article

Harvard and Yale in particular expanded their endowments' investments beyond the traditional bounds of fixed-income and equities and into exotic financial instruments like derivatives, hedge funds and leveraged investment products.

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That's a nice way of saying that during recent years the Harvard Management Company, the university's investment subsidiary, diverted large portions of the university's endowment assets out of safe but poky low-yield securities (as of last June fixed-income investments accounted for only 16% of Harvard's portfolio) and into what this Forbes story describes as "exotic financial instruments": derivatives, hedge funds, private equity partnerships, commodities and emerging-market equities.

FORBES: How Harvard Should Handle Its Endowment

It ignored, for instance, the rise of risky, exotic new financial instruments, primarily credit-default swaps.

FORBES: Magazine Article

Will these be sensible, such as rationalizing our myriad, overlapping financial regulatory structures and pushing for the creation of exchanges and clearinghouses for exotic instruments, such as credit default swaps, so we have transparency and standardization?

FORBES: How Capitalism Will Save Us