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PIMCO to reduce risk exposure of portfolios

Boston, MA 05/15/2013 (wallstreetpr) – The Chief Executive Officer of Pacific Investment Management Co. (PIMCO) had ascertained that the world’s biggest fixed income fund would remain focused on less riskier assets. This decision is in line with the CEO Mohamed El-Erian’s forecast of lack luster growth in the global economy – as he calls it a new normal era.

Global Economy

El – Erian reports that the global economy is moving towards stable disequilibrium stage where the prices are elevated to higher levels and favorable growth shift is missing. This could end in financial turmoil, huge social tensions and beggar – thy – neighbor policies.

The CEO has warned the investors to be prepared for an effective restructuring of their portfolios to include less risky assets such as corporate and sovereign bonds as the economic growth could be highly disappointing. He forecasts that the US economy growth would be only 2 percent on average and that Japan would struggle to sustain the initial surge in economic activity.

El – Erian warns that Europe is facing the threat of zombification where the operations of companies and banks are not contributing much to the economy, despite their continuous operations. further, he projects an annual growth of 6 to 7.5 percent for China.

Central Banks

The CEO of Pacific Investment Management Co. warns that the inflation of global economy would be higher and less stable for the next three to five years. He also warns that central banks are still fighting to remove the sluggish growth in economies with interest rate cuts and asset purchases. He also criticizes the disconnect introduced by central banks between rising market prices and the economic and financial fundamentals.

Strategy of PIMCO

In line with such global developments, the Pacific Investment Management Co. (PIMCO) had decided to reduce the risk posture of its portfolios. The company had advised investors to sell off riskier assets and invest more in government debt including inflation linked securities and nominal Treasuries.

Published by Fiona

Fiona is a finance graduate and an expert in analyzing market trends.

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