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Pimco faces potential losses over exposure to more than $1 billion in Russian debt

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PIMCO headquarters in Newport Beach, California
Scott Mlyn | CNBC

Pimco’s billion-dollar exposure to Russian debt came under pressure as the country, which invaded its neighbor Ukraine causing international outrage, faces risk of a sovereign default.

The asset manager’s $140 billion Pimco Income Fund (PIMIX) held $1.14 billion worth of Russia government international bonds as of the end of 2021, according to the fund’s annual report. The fund, co-run by chief investment officer Dan Ivascyn, also had written $942 million of credit-default swaps protection on Russia by the end of last year.

These CDS enable investors to swap credit risk and Pimco, who sold these securities, will have to pay out should Russia default on its debt.

The fund is off by 5.1% so far this year, slightly more than a Bloomberg benchmark bond index.

Pimco’s Total Return bond fund and Emerging Markets bond fund also held similar positions tied to Russia.

The Financial Times first reported on Pimco’s Russia exposure earlier Thursday. Pimco declined to comment.

These positions could inflict huge losses on Pimco as Russia could be edging closer to a sovereign debt default amid massive sanctions by the U.S. and other countries over the war in Ukraine.

Earlier this week, rating agency Fitch downgraded Russia’s sovereign rating by six notches further into junk territory to a C grade, saying a default is “imminent.”

Moody’s and S&P have also slashed the country’s sovereign rating to “junk” status, saying Western sanctions could undermine Russia’s ability to service its debt.

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