Pimco Takes a Bath on Lehman

Losses From Wrong-Way Bet on Investment Bank’s Bonds Exceed $3.4 Billion

Bond-investing veteran Bill Gross buoyed his reputation during the 2008 financial crisis through well-timed bets on Treasurys and mortgage debt.

Now, new court documents show that he also took a bath in loading up on Lehman Brothers Holdings Inc. debt before the investment bank cratered that year.

Losses on certain Lehman bonds traded by Mr. Gross’s firm, Pacific Investment Management Co., exceed $3.4 billion, according to a Wall Street Journal analysis of liquidation plans and investment disclosures filed in a federal bankruptcy court in New York.

Pimco is among the nation’s largest money managers for mainstream Americans, both through institutional clients, such as pension funds, and mutual funds held in 401(k) retirement accounts. That means the Lehman losses hit ordinary investors who had put their money into Pimco funds during the market boom.

FULL ARTICLE AT WSJ