.jpg)
1 hour ago
2
Article content
(Bloomberg) — The rapid expansion of complex credit structures is reminiscent of the buildup ahead of the global financial crisis, Pacific Investment Management Co.’s Dan Ivascyn warned.
THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLY
Subscribe now to read the latest news in your city and across Canada.
- Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.
- Daily content from Financial Times, the world's leading global business publication.
- Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.
- National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.
- Daily puzzles, including the New York Times Crossword.
SUBSCRIBE TO UNLOCK MORE ARTICLES
Subscribe now to read the latest news in your city and across Canada.
- Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.
- Daily content from Financial Times, the world's leading global business publication.
- Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.
- National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.
- Daily puzzles, including the New York Times Crossword.
REGISTER / SIGN IN TO UNLOCK MORE ARTICLES
Create an account or sign in to continue with your reading experience.
- Access articles from across Canada with one account.
- Share your thoughts and join the conversation in the comments.
- Enjoy additional articles per month.
- Get email updates from your favourite authors.
THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK.
Create an account or sign in to continue with your reading experience.
- Access articles from across Canada with one account
- Share your thoughts and join the conversation in the comments
- Enjoy additional articles per month
- Get email updates from your favourite authors
Sign In or Create an Account
or
Article content
It’s the first time since the crisis that Pimco views the trend as worth monitoring, after years not being particularly concerned, Ivascyn, the firm’s chief investment officer, said at a press briefing Thursday.
Article content
Article content
“Although we don’t see systemic risks today, we’re beginning to see the pace of financial engineering accelerate to a point where it bears watching the next few years,” he said.
Article content
Article content
One particular concern for Ivascyn is that rating companies may be assigning overly generous credit grades to structured securities by placing too much weight on protections such as guarantees and contingent guarantees. It’s a dynamic, he said, that was all too familiar in the run up to the crisis.
Article content
By signing up you consent to receive the above newsletter from Postmedia Network Inc.
Article content
“People are dusting off the old playbooks.”
Article content
The surge in capital needs to finance artificial intelligence and energy infrastructure will intensify efforts to transform inherently risky debt into investment-grade securities, Ivascyn said.
Article content
“There’s a powerful top down desire to create as much investment-grade risk as you can, and these deals are complicated.”
Article content
Pimco, of course, is no stranger to AI and data center financing itself. Over the past year, the asset-management giant has played a central role in some of the largest deals ever assembled. It helped back Meta Platforms Inc.’s roughly $29 billion Hyperion data-center project in Louisiana and, more recently, agreed to provide much of the $16 billion financing package for an Oracle Corp. data center in Michigan.
Article content
Ivascyn on Thursday also flagged the rise of leverage in the exchange-traded fund industry, where everyday investors can get exposure to sometimes double or triple the daily return of some assets.
Article content
“These things are coming out at a very, very aggressive rate with more esoteric collateral,” he warned. “The aggregate size is not concerning just yet, but it definitely feels like there’s been a turn towards much more aggression and an attempt to normalize some of these structures.”
Article content
—With assistance from David Scheer.
Article content
English (US)