What the credit crisis gives, it also takes away. Bond giant Pimco was a huge winner on the Fannie/Freddie rescue, but Bloomberg reports that it did not fare so well with Lehman.
From Bloomberg:
Pimco Advisors LP, Vanguard Group Inc. and Franklin Advisers Inc. are among the investment companies that will face losses of at least $86 billion stemming from the collapse of Lehman Brothers Holdings Inc….
Mutual fund companies’ filings show they hold more than $143 billion of bonds, led by Newport Beach, California-based Pacific Investment Management Co., manager of the world’s biggest bond fund, and Valley Forge, Pennsylvania-based Vanguard….
While bond investors will recover different amounts based on their ranking in Lehman’s capital structure, models of credit default swaps assume lenders will recoup 40 percent of their loans overall in a bankruptcy….
Pimco holds Lehman bonds in at least 12 of its funds, including the $134 billion Total Return Fund. Bill Gross, manager of the fund and co-chief investment officer of Pimco, was buying Lehman bonds as recently as June, Bloomberg data show.
John Woerth, head of public relations at Vanguard, said the company holds Lehman bonds among the $450 billion of fixed income it manages…
Axa SA, Europe’s second-biggest insurer, and unnamed affiliates, own 7.25 percent of Lehman’s equity, according to the filing. Clearbridge Advisers LLC, the asset manager that Baltimore-based Legg Mason Inc. acquired from Citigroup Inc. in 2005, held 6.33 percent, according to the filing. Boston-based FMR LLC, the parent of Fidelity, the world’s largest mutual fund company, held 5.9 percent, the filing said.
Update 1:10 PM: The Wall Street Journal reports that certain Japanese banks have material exposures. Even though the numbers are not large by US standards, they may prove significant to some of the smaller banks.
From the Wall Street Journal:
Several Japanese banks — flush with cash and relatively unscathed by the global credit crisis — are among the top bank lenders to Lehman Brothers Holding Inc., which filed for bankruptcy protection on Monday with $613 billion in debt.
Aozora Bank, a mid-sized Tokyo bank, was No.1 on the list of largest bank lenders with a loan of $463 million, followed by Mizuho Corporate Bank, with a $289 million loan….Other big Japanese lenders to Lehman included Shinsei Bank, another mid-sized Tokyo bank, and Mitsubishi UFJ Financial Group, Japan’s largest bank.
For big Japanese banks like Mitsubishi UFJ and Mizuho, which have huge balance sheets, the loan losses related to Lehman may appear modest.
But smaller banks like Aozora and Shinsei may have a tougher time absorbing the losses. The two banks have been turned around by private-equity investors after collapsing during Japan’s bad-loan crisis. But their performance has been weak in recent quarters. Faced with powerful competition from Japan’s giant banks, they have forayed deeper into riskier business areas…..
The filing doesn’t necessarily mean the loans extended by these banks would go sour…
Filling the slack created by the retreat of Western banks, Japanese banks have been increasing lending business overseas in the past year or so.
11 comments
Comments are closed.
That’s just lazy headline writing. Of course Pimco and Vanguard are the biggest losers among Lehman bond holders. They run the biggest bond funds.
Canadian,
It is not a given that exposures correlate with market share. Vanguard is one of the biggest money market fund managers, yet unlike most of its peers, had no subprime/SIV exposures.
I look forward to the monthly PR/report by Gross, I’m sure it will be entertaining and not point fingers at SIFMA or himself. I wonder who he will point a finger at?
Vanguard Total Bond Market Index: $64 billion in assets, $180 million in Lehman at 2008-06-30
BFD
I just wanted to comment here to thank you for all the solid posts over the last six months, especially regarding LEH, FNM, and FRE. For me, the moment I’m proven right rarely brings as much joy as the angst I go through when I’m besieged with challenges from those mostly filled with nonsense. I’m not sure the words “proven right” are exactly appropriate here in this case, but I hope you understand my meaning. I watched here countless times as your attempts to add to the discussion (rather than make a prediction, really), especially about Lehman’s less than forthright pronouncements, have been shouted down.
Further, after 40 years, it never ceases to amaze me that no matter how many times I’m “proven right” (for lack of a better term), I seem to never get the benefit of the doubt the next time a dispute arises, no matter how much expertise I may have in the area of the dispute. So don’t expect Anonymous on 8/26 or Fred on 8/27 (who was such a jerk that he wouldn’t even admit that his hostility was actually hostility) or all the Lehman supporters throughout the year to ever admit their mistakes or ever acknowledge you have valid points to make in your posts, both in the past and the future. I’m sure they already have dozens of excuses for why they were “right all along.” The human capacity for denial seems unlimited at times.
In any event, I guess I’m just hoping that it helps to know that at least a few people are watching and in the immortal words of Flavor Flav, “know what time it is.”
Yves,
Is it really Billions? This is what I see on the PIMCO site for PTTRX:
20,000,000.000 94.2310 18,846,200.00 A
85,000,000.000 93.1245 79,155,825.00 A
65,000.000 102.0154 66,310.01 A+
200,000.000 88.5040 177,008.00 A
49,670,000.000 95.6760 47,522,269.20 A+
90,000.000 92.1167 82,905.03 A+
100,000.000 96.7847 96,784.70 A+
14,902,381.820 102.3406 15,251,182.51 AA
141,970,000.000 94.7808 134,560,301.76 A+
105,600,000.000 97.1162 102,554,707.20 A+
If you want a real story, consider the just released news that AIG the holding company has been given permission to loot its subs by NY state.
No problem…the retired don’t really need their annuity money anyway. They can fall back on their real estate holdings. :(
How can the rating agencies be allowed to rate these companies with respect to ability to pay, right up to the moment before collapse!!!
Pimco has over $800 Billion in assets, LEH was less than 1% of that amount. And there will be some recovery, they are worth something.
Vanguard funds have very small exposures to LEH. Out of aprox. 120 mutual funds, 18 had exposure to LEH as of June 30. Of these, only 1 – Capital Value – had over 1% of its assets in LEH (1.42%). The next highest is the Adm. Financials Index with .58%. A couple of funds had .38/.39% in LEH. The rest have less than that. This doesn’t hurt Vanguard’s investors any more than anyone else.