PIMCO Headquarters in Newport Beach, CA
Scott Mlyn | CNBC
Pimco’s billion-dollar exposure to Russian debt has come under pressure as the country, which invaded neighbor Ukraine amid international outrage, faces sovereign default risk.
The asset manager’s $140 billion Pimco Income Fund (PIMIX) held $1.14 billion worth of Russian government international bonds at the end of 2021, according to the fund’s annual report. The fund, co-led by chief investment officer Dan Ivascyn, had also purchased $942 million of credit default swap protection on Russia late last year.
These CDS allow investors to trade credit risk and Pimco, which sold these securities, will have to pay if Russia defaults on its debt.
The fund is down 5.1% year-to-date, slightly more than a benchmark Bloomberg bond index.
Pimco’s Total Return bond fund and emerging markets bond fund also held similar Russia-related positions.
The Financial Times first reported on Pimco’s exposure to Russia earlier on Thursday. Pimco declined to comment.
These positions could inflict huge losses on Pimco as Russia could move closer to defaulting on sovereign debt amid massive sanctions from the United States and other countries over the war in Ukraine.
Earlier this week, rating agency Fitch downgraded Russia’s sovereign rating another six notches in junk territory to a C rating, saying a default is “imminent”.
Moody’s and S&P also downgraded the country’s sovereign rating to junk status, saying Western sanctions could undermine Russia’s ability to service its debt.