Investors should prepare for “major structural changes” as the economy shifts to consistently slower global growth, said Mohamed A. El-Erian, CEO of Pacific Investment Management Co., Newport Beach, Calif.
“Forget about being hostage to mindsets that are very cyclical and look broader, because there are some major structural changes — there's some major realignment both at the national level and at the global level,” he said in a radio interview Aug. l3 on “Bloomberg Surveillance” with Tom Keene.
“When you are on a bumpy journey to a new normal, the unthinkable and the improbable become probable.”
Global growth will be below average during the next three to five years as developed economies struggle with mounting deficits and increased regulation following the 2008 collapse of credit markets, he said.
PIMCO's investment strategy has been to shift to higher-quality assets and pursue investments in different parts of the world, Mr. El-Erian said.
The $234 billion Total Return Fund managed by PIMCO co-founder Bill Gross has returned 13% in the past year, outperforming 64% of its peers, according to data compiled by Bloomberg.
The Federal Reserve's decision to reinvest principal payments on mortgage holdings into Treasuries didn't assuage investor concern, and the central bank may not have the appropriate tools to address all of the economy's problems, according to Mr. El-Erian.