💎 Fed’s first rate cut since 2020 set to trigger market. Find undervalued gems with Fair ValueSee Undervalued Stocks

PIMCO CEO sees investment opportunities in distressed credit

Published 06/23/2020, 03:57 PM
Updated 06/23/2020, 04:00 PM
© Reuters.

By Kate Duguid

NEW YORK (Reuters) - The damage done to the U.S. economy by the coronavirus pandemic will create opportunities for investors in distressed credit, PIMCO Chief Executive Emmanuel Roman said at the Bloomberg Invest Global conference on Tuesday.

Roman is not expecting U.S. gross domestic product to return to 2019 levels until the end of 2021. The next 18 months are therefore a time when investors can secure positions in businesses and credit at low prices, he said.

"Distress is a long cycle, and the need to deploy capital to restructuring situations is actually an opportunity to deliver outsized returns," said Roman. "It is something that we are focusing on."

S&P Global Ratings Research estimates that the global default rate for speculative-grade companies will rise to 12.5% by March 2021, from 3.5% as of March 2020.

Earlier this year, Bloomberg reported that PIMCO was seeking to raise up to $3 billion for a distressed debt fund, its largest ever. The Newport Beach, California-based Pacific Investment Management Co (PIMCO) has $1.78 trillion in assets under management.

The path to recovery for some U.S. companies has been and will continue to be aided by the Federal Reserve's stimulus operations, said Roman, noting that the bank's pledged support is ultimately more important than what it actually purchases. Issuance of new investment-grade corporate bonds has broken records this year and in May hit $1 trillion, a threshold not breached in 2019 until November.

Roman said the firm had no plans to acquire rival fund managers, and said that mergers would be scarce while meetings were still largely virtual.

© Reuters. FILE PHOTO: Emmanuel Roman CEO, PIMCO, speaks during the Milken Institute's 22nd annual Global Conference in Beverly Hills, California

"I think when people talk on Zoom, it is not easy to do mergers. Until we get back to face-to-face meetings, I don't think you'll see very many mergers. I think at some point you need to break bread and look each other in the eyes and say 'this is something I want to do.'"

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.