Pimco, the world's largest bond manager with $2.27 trillion in assets, has made a significant move into private debt markets in the Gulf, providing roughly $10 billion in financing to the governments of Abu Dhabi, Qatar, Kuwait, and Qatar National Bank. These transactions occurred after the US-Iran conflict began on February 28, a period when public bond issuance from these Gulf states had largely ceased. The deals allowed Pimco to secure coupon premiums above typical public market levels.
The private placements included upsizing Abu Dhabi's existing bonds by a combined $2.5 billion. Overall, Gulf borrowers have raised more than $13 billion through hard-currency private bonds since February 28, with Pimco absorbing the majority of this demand. For example, Qatar's recent private bond had a coupon of 4.8%, about 0.3 percentage points higher than its public bonds. This strategy offers private markets as a vital funding channel for Gulf states during times of geopolitical uncertainty.
Bloomberg Economics Chief Emerging Markets Economist Ziad Daoud noted that this strategy allows Pimco to avoid tail credit risk while capturing additional yield through the private placement premium. The low transparency of these private transactions, however, has raised concerns about information asymmetry and potential mispricing of risk. Pimco's flagship Income Fund has performed strongly, returning 10.4% year-to-date, providing the capital for such high-conviction trades.
