Pimco is at risk of losing billions in investment following Vladimir Putin's invasion of Ukraine, FT has reported.
The US fund manager amassed a bet that Russia will not default worth at least $1bn in the derivatives market, while also holding $1.5bn of the country's sovereign debt.
The $2.2trn investment firm began this year - when Russian troops were already gathering along Ukraine's border - exposed to $1.1bn of credit default swaps on Russian debt.
The derivative contracts are meant to compensate holders in case the underlying bond issuer fails to make repayments.
MSCI ESG Research downgrades Russia to lowest rating
Analysis by the FT found that at least five Pimco funds sold the CDS to investors wanting to hedge against a potential default.
Pimco has already marked down the positions based on current market valuation. The fund manager also holds $1.5bn of Russia's sovereign debt.
Fitch Ratings downgraded its rating of Russian government bonds to junk status on Wednesday (9 March) and warned that a Russian "sovereign default is imminent".
A default on Russian debt is now seen more likely than before Putin invaded Ukraine. Morgan Stanley warned it could come as early as next month.
