Countries need new growth model: PIMCO

fixed interest bonds portfolio management global economy

25 October 2011
| By Tim Stewart |

In the low-growth 'new normal' of the global economy, countries need to find a way to grow that is not accompanied by the accumulation of debt, according to PIMCO head of global portfolio management Scott Mather.

"We've moved into a phase where we really anticipate for most of the developed world that growth is going to be teetering around zero," Mather said.

He added that a low-growth and low-inflation environment could create lots of opportunities for bond investors, but those opportunities meant that bonds were no longer risk-free, he added.

Countries are not going to be "pulling together" when it comes to monetary and fiscal policy any longer, he added. While there used to be the appearance of economic coordination, countries will now be uncomfortable doing the same things, Mather said.

"Several years from now, we're not going to end up in the same place where growth and inflation look the same everywhere," Mather said.

PIMCO recently surveyed 16 of its institutional clients who represent $300 billion in superannuation assets. In March, respondents were split fifty-fifty on whether US growth would be closer to zero or 3 per cent; today, 80 per cent of respondents said US economic growth would be closer to zero. 

The biggest three concerns for PIMCO clients were the uncertainty in the Eurozone; the potential effects of the collapse of the Euro; and the prospect of deflation around the world. The three biggest opportunities were the rise of skilled alpha strategies; fixed income carry strategies hedged into Australian dollars; and infrastructure and infrastructure debt.

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest news and developments in wealth management industry

MARKET INSIGHTS

GG

So shareholders lose a dividend plus have seen the erosion of value. Qantas decides to clawback remuneration from Alan ...

2 months 3 weeks ago
Denise Baker

This is why I left my last position. There was no interest in giving the client quality time, it was all about bumping ...

2 months 3 weeks ago
gonski

So the Hayne Royal Commission has left us with this. What a sad day for the financial planning industry. Clearly most ...

2 months 3 weeks ago

Insignia Financial has made four appointments, including three who have joined from TAL, to lead strategy and innovation in its retirement solutions for the MLC brand....

1 week 3 days ago

The Reserve Bank of Australia's latest interest rate announcement has left punters disheartened on Melbourne Cup Day....

1 week 2 days ago

The Federal Court has given a verdict on ASIC’s case against Dixon Advisory director Paul Ryan which had alleged he breached his director duties....

1 week 1 day ago