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

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

13 hours ago

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

4 days 18 hours ago

It’s astonishing to see the FAAA now pushing for more advisers by courting "career changers" and international recruits,...

3 weeks 2 days 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....

2 weeks 4 days ago

A former Brisbane financial adviser has been charged with 26 counts of dishonest conduct regarding a failure to disclose he would receive substantial commission payments ...

3 days 16 hours ago

Pinnacle Investment Management has announced it will acquire strategic interests in two international fund managers for $142 million....

2 days 19 hours ago