The US fund manager was in Dublin this week with a warning for the European economy, writes PAT McARDLE
ASK A man in the street to name a leading Irish fund manager and there is a good chance he or she will struggle. Irish fund managers tend to be anonymous, perhaps with good reason given their recent performance.
Only someone who reads the business pages will have heard of Bill Gross, the US’s most prominent bond investor according to the New York Times. Bill is a financial manager and investment author who co-founded Pacific Investment Management Company (Pimco) in Newport Beach, California in 1971. He made his name managing Pimco’s total return fund, usually described as the world’s largest bond fund and is currently its managing director – with more than $1 trillion under management.
Gross is better known these days for his views on the global economy in much the same way as Warren Buffett or George Soros. However, he trails them in the hit brigade. Respectively, they have 4.3 million and 1.5 million Google hits to their names compared with his mere 0.25 million.
Pimco is not short of people with strong opinions. Mohamed El-Erian, the current chief executive and a former IMF staffer, is another regular contributor to the Financial Times.
Andrew Balls, managing director of Pimco’s London office, is not as well known as his brother Ed, but he is no slouch. Prior to joining the company in 2006, he spent eight years at the Financial Times, most recently as editor of the influential US Lex column and was also chief economics correspondent in Washington.
Between them all, it must be hard to get a word in at those regular Pimco investment forums, which have catchy titles like “the new normal”, “driving without a spare” or simply “I don’t care”.
Yesterday, Andrew was in Dublin where he was a panelist at a Chartered Financial Analyst seminar on Investment Strategy in the Post-Crisis World, sponsored by PricewaterhouseCoopers (PwC).
Other participants included Kieran Bristow, chief investment officer at Irish Life Investment Managers; Charlie Fell, managing director of Sequoia Markets and an Irish Times columnist; Noel O’Halloran, chief investment officer at KBC Asset Management; and Ronan Smith, an independent consultant, formerly with Bank of Ireland Asset Managers.
When he spoke to The Irish Times, Andrew provided some interesting insights into current thinking in global financial markets. Pimco remains of the view that the ride to the “new normal” de-leveraged, de-globalised and re-regulated, world will be a bumpy one for investors.
It was surprised by the extent of the rally in risky assets last year and remains concerned about the US, which faces headwinds as the cyclical boost from transient short-term factors is about to ease and the government does not have the capacity to mount another rescue.
However, it is even more concerned about Europe, which faces both short-term (cyclical) and long-term (secular) headwinds, particularly in the peripheral countries.
The recent crisis is a shock to the expectations of some very conservative investors in government bonds who thought they held safe, sovereign, risk but who have woken up to the fact that they have a lot of credit, ie default, risk as well. This is likely to prompt “portfolio shifts” – ie, continued sales of Greek and other European bonds – not to mention the euro itself.
Pimco will wait and watch. Greece “stands out” because of its level of debt and while Ireland has challenges, the picture is “much more positive” in the diplomatic terminology of Andrew Balls.
Meanwhile, his advice to Irish investors is to go global, be prepared to actively manage their investments, keep a close eye on sovereign risks and don’t “hug your benchmark”.
As you might guess, the last has nothing to do with romance. Irish fund managers are not noted lotharios and, anyway, they will be far too busy to have any time for such altruism as they drive without a spare in the new normal, don’t care, Pimco investment world.
