Pimco steps up distressed bet with another US$3b fund

[NEW YORK] Pacific Investment Management Co is seeking to raise another US$3 billion for a distressed credit fund as the rush to capitalise on dislocations in the fixed-income market grows.

Pimco's latest money pool - Distressed Credit Opportunities Fund III - will invest in public market securities, including corporate credit, according to documents from a Fresno County Employees' Retirement Association meeting this month. The fund, dubbed Disco III, will target leveraged loans, high-yield bonds and collateralised loan obligations.

The fund is at least the second that Pimco has been shopping this year. It's also targeting at least US$3 billion for a corporate opportunities fund that will focus on stressed and distressed debt as well as investing in companies that can't access traditional markets.

The bond fund giant is one of more than a dozen investment firms raising in excess of US$40 billion to capitalise on cheap assets that have been hit by the plunge in oil prices and economic fallout from the coronavirus crisis. Other money managers seeking cash include Howard Marks's Oaktree Capital Group, which is targeting US$15 billion for the biggest distressed-debt fund.

"Every manager that covers credit sectors believes this is an excellent opportunity to invest, even though much of the damage to those securities has already been repaired," Doug Kidd, investment officer at the US$4.6 billion Fresno County pension system, said. The pension, which hasn't committed to Pimco's Disco III, was given a presentation on the fund.

"My email is swamped with offers to join webinars or to set up calls to learn about those opportunities," Mr Kidd said. "With so much money chasing those deals, it will be interesting to see what the returns ultimately look like."

A representative for Newport Beach, California-based Pimco, which managed US$1.78 trillion of assets as of the end of March, declined to comment.

Pimco's new funds are part of the company's roughly US$25 billion platform of alternative credit and private strategies, which grew out of the global financial crisis in 2008. The firm has been bolstering its expertise in these often niche markets, including hiring Jamie Weinstein as head of corporate special situations in September and Blackstone Group's Greg Hall as head of private strategies in 2017. The platform is set to grow to US$100 billion in assets when Pimco completes its takeover of the management of parent Allianz's real estate portfolio.

The Disco strategy focuses on less liquid, senior structured credit and will be overseen by Pimco group chief investment officer Dan Ivascyn as well as Weinstein and Josh Anderson, a managing director.

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