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Pimco amassed billions of exposure to Russia debt facing default

edited March 11 in Fund Discussions
The Newport Beach, California-based asset manager had at least $1.5 billion of sovereign debt, according to the latest fund filings compiled by Bloomberg. It had also placed about $1 billion of bets on Russia via the credit-default swap market as of Dec. 31, according to fund documents on its website. The Financial Times reported the holdings earlier on Thursday and said Pimco faces billions of dollars of losses should Russia default on its debt.

The majority of Pimco’s swaps sit in its $140 billion Income fund, run by Chief Investment Officer Dan Ivascyn, alongside Alfred Murata and Joshua Anderson. The fund disclosed that it had written almost $942 million of protection on Russia by the end of 2021. The other funds holding positions include Pimco’s Total Return bond fund, its Emerging Markets bond fund, and Low Duration income funds.
I invested a small % of Pimco Income fund. Several weeks I found the fund has about 1.3% exposure of Russian debt, I sold the entire position.

Also read elsewhere that many emerging bond funds, especially those invested in local currency, have sizable Russia exposure, are having issues. Will the Russian bonds default?

Banks also have billions in to Russia exposure and the fallout is uncertain.


  • edited March 11
    This may not be as huge a problem that the media is making it out to be.

    Insurance companies and funds sell CDSs (i.e. insurance on underlying bonds) in normal times and pocket the premium MOST of the time. But they have to pay up SOMETIMES. The CDS sellers pay only when the swap association declares a default event and that hasn't happened yet. A poster at Fido Inv Community (a closed group, so links not possible) estimated max exposure of Pimco Income/PIMIX at 12c, so not a huge deal when the NAV is $11.22. An open thread is at M*, see below.

    On the other hand, many Pimco CEFs have sold off on such news even when no Russian CDS exposure is seen there (I got a very low-ball limit-buy fill on PDO yesterday and was puzzled at first). Moreover, Blackrock may have much higher exposure to Russian CDS than Pimco. Industry is better prepared now after the AIG fiasco before/during the financial crisis (AIG had an enormous CDS exposure and had to be bailed out).
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