In the aftermath of Puerto Rico’s historic bankruptcy, a clearer picture of losses accrued by U. S. mutual funds on their holdings of Puerto Rican debt is beginning to emerge: the WSJ has calculated the red ink at as much as $5.4 billion over the last five years on total holdings of $14.6 billion. Wall Street’s paper of record lists the funds who have piled up losses, both realized and unrealized, on the trade. These include: Franklin Resources, Oppenheimer, Vanguard, Goldman Sachs Asset Management, Western, Lord, Abbett, AllianceBernstein and Dreyfus.
Of these, Franklin and Oppenheimer are the biggest losers, according to Morningstar data cited by the Journal. Oppenheimer has lost as much as $2.1 billion, and Franklin as much as $1.6 billion. That’s compared with AUMs of $230 billion and $741 billion, respectively.
Meanwhile, six other fund families managed by Vanguard, Goldman, Western Asset, Lord Abbett, AllianceBernstein Holding and Dreyfus have racked up between $100 million and $200 million in losses each.
Of course, in the grand scheme of the funds’ AUMs, the losses so far are negligible, so before retail investors assume that Meredith Whitney’s prediction is finally coming true, resulting in another muni fund panic, it is worth recalling that all these funds have at least $100 billion each in muni-bond assets under management. Furthermore, these investors are likely in better shape than some of their hedge fund colleagues as the damage done to mutual funds, and by extension the retirees and middle-class savers to which they cater, will be an important factor in the court-mandated restructuring of the island’s debt, which begins Wednesday with a hearing in San Juan.
As a reminder, earlier this month, the island’s governing body petitioned for – and its federal oversight board approved – its own version of bankruptcy protection under Title III of a rescue law passed by Congress late last year.
This post was published at Zero Hedge on May 15, 2017.