Pacific Investment Management Co., home to the world’s biggest fixed-income fund, is shying away from risky assets as it sees a growing disconnect between the performances of financial markets and the global economy.
“Especially with ever-elevated prices, and absent a favorable growth shift, we will continue to bring down risk postures of portfolios,” said Mohamed El-Erian, chief executive officer of Newport Beach, California-based Pimco, outlining the company’s investment strategy over the next three to five years.
In Europe, the immediate threat is what El-Erian called “zombification,” where companies and banks continue to operate without adding much to the economy.
Four years after the deepest recession since World War II, central banks are still combatting sluggish economies with interest-rate cuts and asset purchases. So far this month, monetary authorities overseeing a quarter of global gross domestic product have lowered rates, including those of the euro-area, Australia and Israel.