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June 25, 2010 at 08:00 PM
Just in on the red eye, PIMCO powerhouse Rob Arnott spoke to a standing-room-only crowd of about 800 at the Morningstar Investor Conference in Chicago on Thursday, June 24, about real return investing, lessons from the past, and thoughts about the future.
“Is there a better way to allocate assets and construct portfolios?” Arnott asked. “There are always interesting investments–the challenge is identifying opportunities wherever they might be.”
One of those periods of opportunity may be over the next 12 to 18 months when, he predicted, there will be a “generational opportunity to put inflation protection pieces in place when people aren’t worried about inflation.”
The founder of Research Affiliates and manager of PIMCO All Asset and All Asset Authority funds, Arnott is perhaps best known for his view that fundamentally-weighted indexes–those that use fundamental investment metrics such as dividends, sales, revenues, and price-to-book value–do better than cap-weighted indexes, because in cap-weighted indexes you buy more of the “most expensive companies.”
First he wanted to dispel some myths: Arnott contended that in what he calls the “Noughties,” the “lost decade was only lost for [investors who were] equity-centric and anchored on cap weighting.”
“Are stocks priced to deliver a large risk premium? No,” Arnott asserted. While a decade ago they were “extraordinarily expensive,” now they are “moderately expensive.”
