PIMCO Seeks Troubled Assets From Banks

(November 22, 2010) — Pacific Investment Management Co. (PIMCO), one of the world’s largest asset managers, is seeking to raise at least $1 billion to buy troubled assets from banks divesting assets to meet new rules.

According to Bloomberg, the firm will be raising the money for a private fund that will purchase troubled and residential loans and other debt from banks that need to sell off assets to meet new regulations adopted by the Basel Committee on Banking Supervision. An anonymous investor told Bloomberg that the PIMCO Bravo fund, also known as the Bank Recapitalization and Value Opportunities, will acquire the mortgage loans and other debt. PIMCO plans to work with a loan servicer to renegotiate the terms of the acquired debt directly with creditors.

PIMCO’s institutional fund will reportedly target less sizable lenders and community banks, and won’t purchase consumer debt such as credit-card and auto loans. “PIMCO is using a very wise combination of strategies to take advantage of dislocations in the banking system,” Eric Petroff, director of research at consulting firm Wurts Associates in Seattle, told the news agency.

In related news, the firm’s $256 billion Total Return Fund, the world’s biggest bond portfolio run by Bill Gross, upped its percentage of mortgage-related assets in October to the highest level since July 2009. Gross said that the asset purchases by the Federal Reserve will likely signify the end of a 30-year bull market in bonds and the necessity for bond managers and equity managers to adjust to a new environment.