Investment Strategies

The Opportunity – Elevated Risks in Corporate Markets

Elevated risks in corporate markets in addition to persistent catalysts may create opportunities independently of a broader default cycle. Our specialists take a closer look at uncovering value as industries and companies face fresh challenges.

More from this section

Read Transcript

Marc Seidner, CIO Non-Traditional Strategies: Welcome to a discussion with several of my colleagues. We're going to discuss the opportunity that's being created by elevated credit risk in corporate markets. My name is Mark Seidner. I am our chief investment officer of non-traditional strategies.

Today I'm joined by Christian Stracke who is our global head of credit research Jamie Weinstein who is our head of corporate special situations, and Adam Gubner who is one of the senior portfolio managers on the credit opportunities strategies.

Shots from a PIMCO secular forum.

As many of you will know, when we met in May we published a research piece titled, Dealing With Disruption.

Our base case is that we are late in the cycle, that economic risks are growing, downside risks are mounting.

And at some point in the next three to five years, we will see a recession, not just in the United States, but probably globally.

The risks that we have identified, including mounting trade tensions, increasing political polarization and risk, demographics and aging society, technological disruption, all of which we think is leading to mounting risk and increasing financial market vulnerability.

We are certainly seeing much greater differentiated outcomes in credit markets. And we're also seeing the economy, the manufacturing sector in many parts of the world is already in recession or a downturn. And there's severe risks that the consumer sectors will follow soon.

So with that as a backdrop, why don't I turn it to Christian. It's 10 or 11 years post the financial crisis. What do you see in the credit markets?

Christian Stracke: We've had this 10 or 11 years of either very low or very, very low interest rates encouraged by central bank accommodation, which has caused a lot of investors to look for yield. And where have they been able to find that yield has been in many cases in corporate credit. And so as we look around in the economy, there's not a lot of leverage in the economy. 

Corporate leverage to GDP is at an all time high now, higher than it was in 2007, 2008. So there has been some fairly aggressive leveraging of corporate balance sheets.

And as we know, companies don't deleverage by themselves voluntarily. They usually deleverage in periods of stress and distress. And that's what we're looking for is that its late in cycle with companies with this much leverage there will be those opportunities and instances of stress.

Marc: But that does create the opportunity. There's been a great transition of ownership away from banks, or transition of risks away from banks and bank balance sheets, to other yield induced, yield sensitive, rating sensitive buyers of credit risk.

Because here we are when the dynamic does shift, as fundamentals turn, as income streams get shut off, as ratings get downgraded, and as structures that have been created to absorb much of the credit risk that has been issued post financial crisis shifts, right?

Christian: I mean we're in a really perverse kind of situation right now where for the system, the capitalization of banks right now is really good. Banks are much safer than they used to be. And yet for individual cases where you've got something being downgraded, where you've got something that needs to get sold, banks are not able to intermediate that risk anymore the way that they used to because of tighter bank regulation.

That creates opportunities for capital that can come in and take the place of banks either to lend or to intermediate where they once were.

Marc: Motivated buyers can become motivated sellers very quickly.

Christian: Very quickly. 

Marc: Jamie, let's turn to you. I mean here we are 10 or 11 years post the financial crisis. What's — what's different this time? 

Jamie Weinstein: The biggest change is the growth in the private credit markets. Estimates of the size of that market vary quite considerably because there isn't good data on exactly what has happened in the last 11 years as you referenced. But a good number to use that we've seen triangulated on is around $900 billion of assets in private credit.

Now if you think about that and you say, where — where does that sit — how does that come to be, what are those vehicles constructed as. They're generally private credit funds operated by invested managers, and at least in the US context, the business development companies. Those loans that have been made as all of this capital has poured into credit broadly as you define corporate credit, the standards that those loans have been originated to have deteriorated over the last several years.

And so it's our view that the margin of safety that people thought were built into those loans won't actually be as strong as they might have thought it was. In addition to that, liquidity in corporate credit broadly is less than it was because some of the regulatory changes around banks. In private credit it's effectively nonexistent.

If you try to size how big is that opportunity set, you don't really have to be that precise. If you start with that 900 billion size, if you say only 10 percent of those loans end up under stress and those need to transition, that's a huge opportunity set for investors focused on that type of thing.

And then lastly, as you think about the banking system and what is their role in this.

Shots from outside of a bank and a shot of a transaction occurring with a teller.

The banks often are providing leverage to those funds. So even though the banks are not the actual holder of the credit risk like they might have been in prior cycles, they now hold it indirectly through these portfolio loans. And they may be one of the triggering points as you mentioned that creates that pressure for loans to move. 

Marc: So size, leverage, ownership, protections to bond holders, all risks that we see in — in the coming environment. But Adam, it's very possible, and we talk about this a lot, that recession may not be imminent.

What if it's delayed? What if the inevitable is not right around the corner?

Adam Gubner: We've talked about all the liquidity in the system. And we've still been able to find opportunities. And in particular certain industries are still having some challenges,

Shot from inside a shopping mall and shots of busy street with shops on thems.

and we've been able to invest in things like retail and consumer, or think about specialty finance where they have nascent business models, and again aren't necessarily able to kind of attract the traditional capital.

And then lastly energy, which continues to have periods of dislocation. Where we've really tried to stay away from are companies going through secular challenges.

Shots of coal mining operations.

So coal is a great example of where a lot of folks really made some errors thinking that the decline would be slower. And ultimately they were just wrong. And again, we've stayed away from those types of opportunities. 

Marc: So in closing, we're all very excited about the potential opportunities that are coming out of an evolving secular view. The rising of balances in the corporate lending market, that the private credit markets are what's different this time, or the time horizon might be extended. There's plenty of opportunities in capital solutions to find value or take advantage of stress or distress in a rolling opportunity set as individual industries and companies find challenges.

For more insights and information visit


All investments contain risk and may lose value. Investing in the bond market is subject to risks, including market, interest rate, issuer, credit, inflation risk, and liquidity risk. The value of most bonds and bond strategies are impacted by changes in interest rates. Bonds and bond strategies with longer durations tend to be more sensitive and volatile than those with shorter durations; bond prices generally fall as interest rates rise, and low interest rate environments increase this risk. Reductions in bond counterparty capacity may contribute to decreased market liquidity and increased price volatility. Bond investments may be worth more or less than the original cost when redeemed. Corporate debt securities are subject to the risk of the issuer’s inability to meet principal and interest payments on the obligation and may also be subject to price volatility due to factors such as interest rate sensitivity, market perception of the creditworthiness of the issuer and general market liquidity. Investing in distressed companies (both debt and equity) is speculative and subject to greater levels of credit, issuer and liquidity risks, and the repayment of default obligations contains significant uncertainties; such companies may be engaged in restructurings or bankruptcy proceedings.

There is no guarantee that these investment strategies will work under all market conditions or are suitable for all investors and each investor should evaluate their ability to invest long term, especially during periods of downturn in the market. Investors should consult their investment professional prior to making an investment decision.

This material contains the opinions of the manager and such opinions are subject to change without notice. This material has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.

PIMCO as a general matter provides services to qualified institutions, financial intermediaries and institutional investors. Individual investors should contact their own financial professional to determine the most appropriate investment options for their financial situation. This is not an offer to any person in any jurisdiction where unlawful or unauthorized. | Pacific Investment Management Company LLC, 650 Newport Center Drive, Newport Beach, CA 92660 is regulated by the United States Securities and Exchange Commission. | PIMCO Europe Ltd (Company No. 2604517) and PIMCO Europe Ltd - Italy (Company No. 07533910969) are authorised and regulated by the Financial Conduct Authority (12 Endeavour Square, London E20 1JN) in the UK. The Italy branch is additionally regulated by the Commissione Nazionale per le Società e la Borsa (CONSOB) in accordance with Article 27 of the Italian Consolidated Financial Act. PIMCO Europe Ltd services are available only to professional clients as defined in the Financial Conduct Authority’s Handbook and are not available to individual investors, who should not rely on this communication. | PIMCO Deutschland GmbH (Company No. 192083, Seidlstr. 24-24a, 80335 Munich, Germany), PIMCO Deutschland GmbH Italian Branch (Company No. 10005170963), PIMCO Deutschland GmbH Spanish Branch (N.I.F. W2765338E) and PIMCO Deutschland GmbH Swedish Branch (SCRO Reg. No. 516410-9190) are authorised and regulated by the German Federal Financial Supervisory Authority (BaFin) (Marie- Curie-Str. 24-28, 60439 Frankfurt am Main) in Germany in accordance with Section 32 of the German Banking Act (KWG). The Italian Branch, Spanish Branch and Swedish Branch are additionally supervised by the Commissione Nazionale per le Società e la Borsa (CONSOB) in accordance with Article 27 of the Italian Consolidated Financial Act, the Comisión Nacional del Mercado de Valores (CNMV) in accordance with obligations stipulated in articles 168 and  203  to 224, as well as obligations contained in Tile V, Section I of the Law on the Securities Market (LSM) and in articles 111, 114 and 117 of Royal Decree 217/2008 and the Swedish Financial Supervisory Authority (Finansinspektionen) in accordance with Chapter 25 Sections 12-14 of the Swedish Securities Markets Act, respectively. The services provided by PIMCO Deutschland GmbH are available only to professional clients as defined in Section 67 para. 2 German Securities Trading Act (WpHG). They are not available to individual investors, who should not rely on this communication. | PIMCO (Schweiz) GmbH (registered in Switzerland, Company No. CH-, Brandschenkestrasse 41, 8002 Zurich, Switzerland, Tel: + 41 44 512 49 10. The services provided by PIMCO (Schweiz) GmbH are not available to individual investors, who should not rely on this communication but contact their financial adviser. | PIMCO Asia Pte Ltd (Registration No. 199804652K) is regulated by the Monetary Authority of Singapore as a holder of a capital markets services licence and an exempt financial adviser. The asset management services and investment products are not available to persons where provision of such services and products is unauthorised. | PIMCO Asia Limited is licensed by the Securities and Futures Commission for Types 1, 4 and 9 regulated activities under the Securities and Futures Ordinance. The asset management services and investment products are not available to persons where provision of such services and products is unauthorised. | PIMCO Australia Pty Ltd ABN 54 084 280 508, AFSL 246862 (PIMCO Australia). This publication has been prepared without taking into account the objectives, financial situation or needs of investors. Before making an investment decision, investors should obtain professional advice and consider whether the information contained herein is appropriate having regard to their objectives, financial situation and needs. | PIMCO Japan Ltd, Financial Instruments Business Registration Number is Director of Kanto Local Finance Bureau (Financial Instruments Firm) No. 382. PIMCO Japan Ltd is a member of Japan Investment Advisers Association and The Investment Trusts Association, Japan. All investments contain risk. There is no guarantee that the principal amount of the investment will be preserved, or that a certain return will be realized; the investment could suffer a loss. All profits and losses incur to the investor. The amounts, maximum amounts and calculation methodologies of each type of fee and expense and their total amounts will vary depending on the investment strategy, the status of investment performance, period of management and outstanding balance of assets and thus such fees and expenses cannot be set forth herein. | PIMCO Taiwan Limited is managed and operated independently. The reference number of business license of the company approved by the competent authority is (107) FSC SICE Reg. No.001. 40F., No.68, Sec. 5, Zhongxiao E. Rd., Xinyi Dist., Taipei City 110, Taiwan (R.O.C.), Tel: +886 2 8729-5500. | PIMCO Canada Corp. (199 Bay Street, Suite 2050, Commerce Court Station, P.O. Box 363, Toronto, ON, M5L 1G2) services and products may only be available in certain provinces or territories of Canada and only through dealers authorized for that purpose. | PIMCO Latin America Av. Brigadeiro Faria Lima 3477, Torre A, 5° andar São Paulo, Brazil 04538-133. | No part of this publication may be reproduced in any form, or referred to in any other publication, without express written permission. PIMCO is a trademark of Allianz Asset Management of America L.P. in the United States and throughout the world. ©2019, PIMCO.


Filters: Reset All


Close Filters Dropdown
  • Tags


  • Category


    Bond by Bond
    Economic and Market Commentary
    Investment Strategies
    PIMCO Foundation
    PIMCO Education
    View from the Investment Committee
    View From the Trade Floor
  • Order By


    Most Recent
() filters applied

Multimedia Finder

Filter By:
  • Bond by Bond
  • Careers
  • Economic and Market Commentary
  • Investment Strategies
  • PIMCO Foundation
  • PIMCO Education
  • View from the Investment Committee
  • View From the Trade Floor
  • Viewpoints
  • Understanding Investing
  • A
  • B
  • C
  • D
  • E
  • F
  • G
  • H
  • I
  • K
  • M
  • N
  • P
  • Q
  • R
  • S
  • T
  • W
  • Z
Berdibek Ahmedov
Product Strategist, Equities and Multi-Asset
Joshua Anderson
Portfolio Manager, Income and Asset-Backed Securities
Del Anderson
Credit Analyst
Robert Arnott
Founder and Chairman, Research Affiliates
Andrew Balls
CIO Global Fixed Income
Justin Blesy
Asset Allocation Strategist
Meredith Block
ESG Research Analyst
Allison Boxer
David L. Braun
Portfolio Manager
Jelle Brons
Portfolio Manager, Global and U.S. Investment Grade Credit
Nathaniel Brown
Director of the PIMCO Foundation
Erin Browne
Portfolio Manager, Multi-Asset Strategies
Esteban Burbano
Fixed Income Strategist
Grover Burthey
Portfolio Manager, ESG
Libby Cantrill
U.S. Public Policy
Kenneth Chambers
Fixed Income Strategist
Stephen Chang
Portfolio Manager, Asia
Devin Chen
Portfolio Manager, Commercial Real Estate
Richard Clarida
Global Economic Advisor
Mathieu Clavel
Portfolio Manager, Alternative Credit
Tony Crescenzi
Portfolio Manager, Market Strategist
Josh Davis
Global Head of Risk Management
Pramol Dhawan
Portfolio Manager
Matt Dorsten
Portfolio Manager, Quantitative Strategy
Devin Ekberg
Senior Consultant, Advisor Education
David Fisher
Co-Head of Strategic Accounts, U.S. Global Wealth Management
David Forgash
Portfolio Manager
Preeyam Gandhi
Max Gelb
Product Strategist
Nick Granger
Portfolio Manager, Quantitative Analytics
Adam Gubner
Portfolio Manager, Distressed Debt
Gregory Hall
Head of U.S. Global Wealth Management
Mary Hoppe
Account Manager
Ray Huang
Portfolio Manager, Real Estate
Daniel H. Hyman
Portfolio Manager
Daniel J. Ivascyn
Group Chief Investment Officer
Mark R. Kiesel
CIO Global Credit
Erica Kinsella
Product Strategist, ESG Strategies
Sean Klein
Head of Client Business Strategy – Client Solutions and Analytics
Kristofer Kraus
Portfolio Manager
Raji O. Manasseh
Equity Strategist
Jason Mandinach
Head of Alternative Credit and Private Strategies
Samuel Mary
ESG Research Analyst
Kyle McCarthy
Alternative Credit Strategist
Mohit Mittal
Portfolio Manager, Multi-Sector
Alfred T. Murata
Portfolio Manager, Mortgage Credit
John Murray
Portfolio Manager, Global Private Real Estate
John Nersesian
Head of Advisor Education
Roger Nieves
Rick Pagnani
Head of Insurance-Linked Securities
Sonali Pier
Portfolio Manager, Multi-Sector Credit
William Quinones
Product Strategist
Lupin Rahman
Portfolio Manager
Graham A. Rennison
Quantitative Portfolio Manager
Libby Rodney
Steve A. Rodosky
Portfolio Manager
Emmanuel Roman
Chief Executive Officer
Steve Sapra
Senior Advisor
Jerome M. Schneider
Portfolio Manager
Marc P. Seidner
CIO Non-traditional Strategies
Emmanuel S. Sharef
Portfolio Manager, Asset Allocation and Multi Real Asset
Greg E. Sharenow
Portfolio Manager, Commodities and Real Assets
Candice Stack
Head of Client Management, Americas
Kimberley Stafford
Global Head of Product Strategy; Responsible for Sustainability Oversight
Cathy Stahl
Global Head of Marketing
Jason R. Steiner
Portfolio Manager, Private Lending and Opportunistic Strategies
Christian Stracke
President, Global Head of Credit Research
Geraldine Sundstrom
Portfolio Manager, Asset Allocation, EMEA
Richard Thaler
Distinguished Service Professor of Economics and Behavioral Science at the University of Chicago's Booth School of Business
Jessica K. Tom
Senior Credit Analyst
François Trausch
CEO and CIO of PIMCO Prime Real Estate
Jerry Tsai
Client Solutions and Analytics
Matt Tuten
Portfolio Manager
Megan Walters
PIMCO Prime Real Estate
Qi Wang
CIO Portfolio Implementation
Jamie Weinstein
Portfolio Manager, Corporate Special Situations
Paul-James White
Portfolio Manager
Tiffany Wilding
Andrew T. Wittkop
Portfolio Manager, Treasuries, Agencies, Rates
Jerry Woytash
Portfolio Manager, Short-Term Desk
Kirill Zavodov
Portfolio Manager
Mike Cudzil
Portfolio Manager
Ben Bernanke
Chair, Global Advisory Board
Stuart Graham
Head of PIMCO Canada
Seray Incoglu
Portfolio Manager, Commercial Real Estate
  • Alphabetical
  • Most Recent
Section : Date : Experts :
Reset All
Decoding Quant Strategies
Capitalizing on Change in the Real Estate Market (Video)

Capitalizing on Change in the Real Estate Market(video)

Capitalizing on Change in the Real Estate Market

Discover potential opportunities in the real estate market from a panel discussion at our recent Alternatives Investor Conference.

Navigating Uncertainty with Alternative Investments

Unlocking the Power of Alternative Investments

Adapting to the Evolving Credit Landscape

Decoding Quant Strategies

Adapting to the Evolving Credit Landscape (Video)

Adapting to the Evolving Credit Landscape(video)

Adapting to the Evolving Credit Landscape

Learn how to navigate the shifting dynamics in banking and private credit from a panel discussion at our recent Alternatives Investor Conference.

Navigating Uncertainty with Alternative Investments

Unlocking the Power of Alternative Investments

Capitalizing on Change in the Real Estate Market

Decoding Quant Strategies

Unlocking the Power of Alternative Investments
Navigating Uncertainty with Alternative Investments
Value Returns to Fixed Income Markets

Load more results Load {{cCtrl.fetchResults}} more results