Betting on emerging markets has led to losses for many over the past year – but among big investors few got the timing of their wagers as wrong as Pacific Investment Management Co, the giant bond firm that has recently been roiled by a rupture at the top.
While a lot of attention has been paid to a dramatic falling out between co-founder Bill Gross and former CEO Mohamed El-Erian, and the underperformance of and outflows from its flagship Total Return Fund, few have taken notice of the firm’s failed investments in emerging markets debt.
In particular, it has made made some ill-timed bets in the Brazilian, Mexican and Russian debt markets. It made substantial investments in some companies that have gone belly-up, such as Brazilian oil company OGX Petróleo e Gás Participações SA, which was controlled by Eike Batista, who only two years ago was estimated to be the world’s seventh-richest man but whose business empire has now largely crumbled.
Gross, El-Erian, and a Pimco spokesman declined to comment for this article.
Already, investors have pulled almost $2 billion from Pimco’s emerging markets debt funds during the first four months of this year, according to Morningstar data, with $639 million of that departing in April alone. By comparison, the funds bled $2 billion of net outflows for all of 2013.