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

Completely agree Peter. The definition of 'significant change is circumstances relevant to the scope of the advice' is s...

4 weeks ago

This verdict highlights something deeply wrong and rotten at the heart of the FSCP. We are witnessing a heavy-handed, op...

1 month ago

Interesting. Would be good to know the details of the StrategyOne deal....

1 month 1 week ago

Insignia Financial has confirmed it is considering a preliminary non-binding proposal received from a US private equity giant to acquire the firm. ...

1 week 5 days ago

Six of the seven listed financial advice licensees have reported positive share price growth in 2024, with AMP and Insignia successfully reversing earlier losses. ...

1 week 1 day ago

Specialist wealth platform provider Mason Stevens has become the latest target of an acquisition as it enters a binding agreement with a leading Sydney-based private equi...

1 week ago