Giant bond fund supports Obama’s public-private plan


  • Business
  • Wednesday, 25 Mar 2009

NEW YORK: Bill Gross, the influential manager of the world’s largest bond fund, gave the Obama administration’s financial stability effort a much-needed endorsement on Monday, saying PIMCO will participate in the public-private plan.

“This is perhaps the first win-win-win policy to be put on the table and it should be welcomed enthusiastically,” the founder and co-chief investment officer of PIMCO told Reuters.

Gross’ Pacific Investment Management Co oversees roughly US$800bil. He manages PIMCO’s flagship Total Return fund, which currently has US$139bil in assets.

“We intend to participate and do our part to serve clients as well as promote economic recovery,” he said, adding that PIMCO would both buy toxic assets and manage some of them.

Another influential money manager, BlackRock Inc, told Reuters on Sunday that it too intends to be involved as one of the investment managers in the public-private investment fund. A Kohlberg Kravis Roberts & Co executive said on Monday the private equity firm would be “happy and willing” to partner with the government if an investment deal to buy assets made sense.

“From PIMCO’s perspective, we are intrigued by the potential double-digit returns as well as the opportunity to share them with not only clients but the American taxpayer,” Gross said.

Gross’s endorsement is important after the lack of big investor interest in the debut of the Federal Reserve’s consumer lending programme last week.

The Fed’s Term Asset-Backed Securities Loan Facility, or TALF, received only US$4.7bil in requests for loans out of US$200bil on offer, heightening fears that big money managers will also shun the government’s toxic-asset plan.

There is concern that any financial firm getting involved in the toxic asset plan could face retroactive limits on compensation or profits.

“There’s a sense of having gone too far and there’s fear that anyone that participates in this or any other government programme would be subject to increased scrutiny and standards that didn’t exist in the past ... I couldn’t discourage that thinking,” Gross told Reuters Financial Television.

“I would point to Secretary (Timothy) Geithner’s guarantee and promise as well as that from (Federal Reserve chairman) Ben Bernanke that basically they want to maintain and ultimately produce a thriving private sector and the limitations that may be placed on AIG connections, I guess, won’t exist in this particular programme. So PIMCO has no fear of that, so to speak.”

He said the Treasury’s public-private partnership plan has “an objective of liquefying relatively frozen portions of the credit market and promoting the extension of new loans in the US economy.”

Gross added: “To succeed, it will require participation from both willing buyers as well as sellers, in addition to the substantial government assistance being provided in the proposed policy package.” – Reuters

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