Tags: pimco | focus | less | u.s. | Mohamed | El-Erian

Pimco: For Success, Focus Less on U.S.

By    |   Wednesday, 16 Dec 2009 03:22 PM

The economy is experiencing growth for the first time in more than a year, but to sustain the momentum, investors must seek opportunities overseas, says Pimco CEO Mohamed El-Erian.

“We've had one quarter of economic growth, which is probably going to be revised down, but it's going to be in the 2½ percent range for the third quarter,” El-Erian tells Fortune Magazine.

“The fourth quarter will probably be in the 3 percent range. The question is: ‘Can we sustain growth in 2010? And our worry is that it's going to be very difficult.’”

What should individual investors do differently to keep making money?

“The average investor has two issues today. First, the average investor is too U.S.-centric. There's a reason for that; the behavioral finance people will tell you that we like the familiar, so we tend to invest in names that we know, that give us comfort,” El-Erian says.

“The problem is that you don't want to be too U.S.-centric in a globalizing world where the center of gravity is shifting. So the first thing for the average investor to recognize is that the asset allocation of tomorrow is much more global than the asset allocation of yesterday.”

A model portfolio should look something like this now, says El-Erian:

Equities:
— USA: 15 percent
— Other Advanced Economies: 15 percent
— Emerging Economies: 12 percent
— Private: 7 percent

Bonds:
— USA: 5 percent
— International: 9 percent

Real Assets:
— 28 percent

There are other concerns too.

“Most of us have been very lucky,” says El-Erian. “We haven't had to worry about inflation for a long time. We're moving toward a much more fluid world in which, at some point, inflation will come back.”

Indeed, other investors are taking note of inflation as well, as producer prices increased by 1.8 percent in November, reports MarketWatch.

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The economy is experiencing growth for the first time in more than a year, but to sustain the momentum, investors must seek opportunities overseas, says Pimco CEO Mohamed El-Erian. We've had one quarter of economic growth, which is probably going to be revised down, but...
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