PIMCO Exec Mohamed El-Erian Discusses Key Issues in 2010

(March 3, 2010) — At an annual conference of Allianz Global Investors (AGI) in London, Pacific Investment Management Co. (PIMCO) chief executive Mohamed El-Erian discussed the major issues of 2010.

He expressed a shift in the approach to traditional liability driven investment (LDI) strategies, according to Global Pensions.

“Indices traditionally used to construct portfolios matching pension funds liabilities are snapshots of the past,” said El-Erian at the conference, Global Pensions reported . “Schemes are now increasingly looking at including forward looking indices, but also at introducing active elements in their LDI approaches.”

He added that pension funds must embrace “smart passive” LDI strategies as part of a broader process of “resetting [of the global economy] into a new normal.”

Additionally, El-Erian said sovereign risk is a major issue in 2010. He asserted that asset managers must devote attention to the global gross domestic product (GDP), adding that the UK would likely more easily handle its debt burden than Greece and other euro-zone members. While 5% of countries in the world had a GDP deficit above 10% in 2008, the percentage grew to 46% in 2010, according to Reuters.

PIMCO, which oversees about $985 billion, is the world’s largest bond fund. In 2009, it added nearly $280 billion in assets, a 40% increase from the previous year. According to AGI, PIMCO’s parent company, PIMCO has increased its assets by an average of 17% each year since 2002.