(Bloomberg) -- Funds run by BlueBay Asset Management and Pacific Investment Management Co. are among the hardest hit after Swiss regulators wiped out 16 billion Swiss francs ($17.3 billion) of risky bonds issued by Credit Suisse Group AG.

BlueBay’s $2 billion Financial Capital Bond fund and Pimco’s $1.3 billion Preferred and Capital Security fund both lost more than 8% each in the week through Monday, making them the two worst-performing open-ended bond funds globally managing over $1 billion, according to data compiled by Bloomberg. 

The historic writedown of the notes has sent shockwaves through the market, with bondholders arguing that shareholders should have taken the first hit. Both funds held the so-called Additional Tier 1 bonds issued by the Swiss bank, data compiled by Bloomberg show.

During an interview with Bloomberg Television on Tuesday, BlueBay’s chief investment officer Mark Dowding criticized the Swiss government’s actions around the assets, saying the “authorities made some wrong steps in what they were doing.”

Dowding declined to comment about whether his firm is pursuing litigation against Swiss regulators. Banks have been taking bids this week on claims against Credit Suisse from investors betting they can recover some value, potentially through litigation.

Dowding said he still saw a “very interesting” opportunity in Additional Tier 1 securities, adding that European banks are facing the best operating environment they’ve seen in more than a decade.

Newport Beach, California-based asset manager Pimco is the largest holder of Credit Suisse’s AT1 bonds, holding around $807 million of the securities. BlueBay held around $134 million of the notes at the end of November, according to filing data compiled by Bloomberg.

A representative for Pimco declined to comment and a spokeswoman for London-based BlueBay didn’t immediately respond to a request for comment on the fund losses.

The Pimco fund plunged by more than 4% on Monday, its biggest daily slump since March 2020, down 8.4% in the week through Monday, the data show. BlueBay’s fund dropped 9.5% in the same week. 

AT1 notes were created by regulators after the global financial crisis as a way of imposing losses on creditors to stabilize banks under stress. In Europe, no other major banks besides Credit Suisse and UBS have provisions that would allow for the full writedown of this type of bond, according to Jeroen Julius, a Bloomberg Intelligence senior credit analyst. This feature allowed Credit Suisse’s equity investors to maintain some value as bondholders were wiped out.

What Bloomberg Intelligence Says:

“The full and permanent write-down language of Credit Suisse’s AT1 bonds with regard to principal loss absorption enabled the write-off.” 

— Jeroen Julius, a Bloomberg Intelligence senior credit analyst. Read more here.

--With assistance from Katherine Griffiths.

(Adds comments from interview with Bluebay CIO throughout.)

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