PIMCO’s CEO and Co-CIO Mohamed A. El-Erian says business at the bond shop is “booming,” which is not a good sign for the U.S. economy, he told Bloomberg in a radio interview on September 10.
El-Erian said that net inflows into bond funds reached $120 billion in the first eight months of 2010.
The PIMCO Total Return Fund, for instance, attracted $2 billion in June and the same amount in July, according to the Financial Research Corporation. It now has about$240 billion in assets, says FRC.
“It has a bad impact on the economy as a whole,” El-Erian said in the Bloomberg interview. “The average investor is de-risking their portfolio, moving from equities into cash and bonds and that is not a good sign for the economy if people become more and more risk- averse.”
The bond shop recently made its own push into equities, introducing the PIMCO Equity Series Pathfinder Fund in April, its first active equities product. In addition, it plans to offer four or five more new global equities strategies over the next few years, according to Neel Kashkari, head of PIMCO’s investment initiatives, who spoke with Reuters on September 7.
El-Erian also recently shared his comments with the Financial Times and online regarding U.S. economic policy.
The PIMCO CEO says he’s like to see: a set of self-reinforcing measures on both the demand and supply side that signal the Obama Administration’s recognition of the seriousness of the economic situation, as well as plans to address the increasingly visible structural headwinds that undermine high growth and meaningful job creation and that stand a good chance of implementation.
El-Erian would also like to see change in “the widespread perception that, to date, economic policy responses have been ad hoc, piecemeal, uncoordinated and reactive. This requires the Administration to communicate a credible and clear medium-term economic vision – one that is strategic in nature, unifying in design, and closely linked to measures that inform, influence and lead developments on the ground,” he wrote.
Also, he is calling for Obama to put his economic team “in a more credible global position.”