Pacific Investment Management Co. built up billions of exposure to Russian debt, opening up its funds to losses as markets price in a default by the sovereign.
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.
A representative for Pimco declined to comment.
If the swap market is to be believed, the probability of Russia defaulting on its foreign debt is high and the insurance is going to pay out.
Trading on credit-default swaps, derivatives used to insure against non-payment of the debt they're tied to, suggest that there's a 71% chance of default within a year and 81% within five years. That means that much of the losses that Pimco's funds face will already be reflected in their values.
At least four of Pimco funds sold credit-default swaps to investors, according to analysis of Pimco's holdings at the end the year. That means that if Russia defaults on its debt, Pimco will have to pay out.
