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Gross Doesn't Let SEC Guidelines Stand In Way Of Big Bond Bets
He structured his positions by entering into swaps contracts in which he agreed to insure against default almost $1.7 billion of bonds as of the end of June, the most recent data available show. While most funds limit their exposure to just a small percent of assets, Gross’s use exceeded the market value of his fund’s holdings, which were $1.46 billion at the time.
“There is as much interest rate risk and as much credit risk in the credit default swaps as in the rest of the $1 billion portfolio combined,” said Craig McCann, an economist at Securities Litigation & Consulting Group, who reviewed Gross’s fund holdings.
Whoa! I wonder if investors understood they had this degree of exposure at the time? "Kind of" unnerving. CIO Smith, hello? Myron Scholes, Ashwin Alankar--- anybody on deck? Anybody?
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"Kind of" unnerving.
CIO Smith, hello? Myron Scholes, Ashwin Alankar--- anybody on deck? Anybody?