The Pacific Investment Management Co. (Pimco) has warned the U.S. Treasury Department about the fallout to investors from the strict sanctions that are pushing Russia toward default.

Executives at the asset management giant told the U.S. Treasury that U.S. pension funds will face losses if fund managers are forced to write down their Russian holdings, according to people familiar with the matter. They also made the point that a Russian default would allow President Vladimir Putin to keep foreign currency reserves, which would have otherwise been paid to creditors—giving him more money for war efforts—said the people, who asked not to be identified because the matter is private.

Pimco held the equivalent of about US$1.8 billion of Russian sovereign bonds, as well as exposure through credit-default swaps in its largest fund, the $124 billion Income Fund, according to its first quarter holdings report released last month. Pimco managed $2.2 trillion overall at year-end.