Bloomberg News

World Bank Hires Pimco to Manage Local Currency Bonds

February 19, 2008

The World Bank selected Pacific Investment Management Co. to manage a project designed to promote investment in local-currency bonds in emerging markets.

The World Bank's International Finance Corp. unit also announced that Markit Group Ltd., the London-based data provider that publishes a global benchmark for credit pricing, will develop an index of emerging-market local currency bonds.

The development lender is seeking to encourage local- currency bond markets as a way of reducing emerging markets' borrowing from abroad, which has led to debt crises in the past. The World Bank announced the project in October, setting an initial target for a $5 billion fund to attract investment.

The project will help ``boost growth and overcome poverty by increasing investment in emerging markets and improving access to long-term local currency finance,'' World Bank President Robert Zoellick said in a statement today.

Newport Beach, California-based Pimco manages the world's biggest bond fund. Its joint chief executive officer, Mohamed El-Erian, is a veteran of the International Monetary Fund, which is also based in Washington.

IFC spokeswoman Lotte Pang today said the World Bank would no longer comment on the expected size of the fund. In October, the IFC said the fund would start investing in 15 to 20 emerging markets and then expand to 40 nations within five years.

The World Bank said in October that it aimed to hire a fund manager by the end of November and raise the target amount of money by 2008.

In addition to setting up a fund to invest in local currency emerging-market bonds, the project will also provide advice to countries on how to increase the appeal of their bonds in global capital markets.

``Institutional investors have been put off from investing in local currency debt in emerging markets by the lack of access, poor market infrastructure and excessive red tape,'' the World Bank said on its Web site. ``While about 70 percent of all emerging markets debt is denominated in local currency, institutional investors hold only around 10 percent of their emerging markets debt investments in local currency.''

To contact the reporter on this story: Christopher Swann in Washington at cswann1@bloomberg.net;

To contact the editor responsible for this story: Chris Anstey at canstey@bloomberg.net;


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