Allianz’s Mohamed El-Erian on life after Pimco
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If there ever comes a time when Mohamed El-Erian, Pimco’s former co-chief investment officer, is ready to talk about his sudden split from the US bond house, then that moment has yet to arrive.
Almost two and a half years after the 57-year-old announced his surprise departure from Pimco, Mr El-Erian still refuses to take questions on why he left the company he joined 15 years earlier, and what went on between him and its founder, Bill Gross.
At the time it was reported that Mr El-Erian departed amid infighting with Mr Gross, who himself walked out of the company eight months later.
Whatever did transpire, it is clear the two are now on opposing sides. While Mr El-Erian holds the grand title of chief economic adviser to Allianz, the insurer that is Pimco’s parent company, Mr Gross is suing the bond house for at least $200m, claiming that executives plotted to oust him and divide his bonus among themselves.
Mr El-Erian appears happy to have some distance from that particular battle. As he politely declines to answer questions on whether he would ever return to Pimco now that Mr Gross has departed, on how often he speaks to the 72-year-old and on what exactly triggered his own departure, he says: “I’m enjoying life now”.
“I made a promise to spend more time with my daughter and I am doing that. I have no plans to give up what I am doing.”
The promise he is referring to relates to a 22-point list his 13-year-old daughter gave him, noting all the events he had missed in her life as a result of his commitments to Pimco. The list included him being absent from her first day at school, her first football match and a Halloween parade.
We meet in London at one of Allianz’s offices close to the Bank of England at the end of a week-long European tour for Mr El-Erian, which included stops in Berlin and Munich, and just ahead of a visit to Cambridge university. “I am looking forward to getting back to see my daughter,” he says.
His schedule is full but his days are not as arduous as they were at Pimco, where Mr El-Erian arrived at the office at 4.30am.
He says: “Half of my time is now spent with Allianz, where I chair committees, participate in meetings, speak at various Allianz events and meet clients. I am available as a resource to Allianz.
“Then a quarter of my time is spent writing [Mr El-Erian writes a column for the Financial Times twice a month] and the final quarter is spent serving Barack Obama’s global development council and speaking and meeting with governments.”
It is clear Mr El-Erian, who chairs the global development council (something he calls a privilege), enjoys his ties with the US president. He only asks to go off the record twice during the hour-long interview — once to recount a personal story that saw him switch into the world of finance from one where he was predestined to become an academic — and another to recall a meeting with Mr Obama that “left a deep impression” on him. It is a nice story.
“I like President Obama very much. He is very analytical, he very quickly grasps the main issues and he is very smart. The US will miss him,” he says.
Mr Obama’s presidency will end in January next year when America’s 45th president takes office. Businessman Donald Trump, the Republican candidate, and former secretary of state Hillary Clinton, the Democratic candidate, are battling for his seat.
“I would prefer for Hillary Clinton to win,” Mr El-Erian says with an air of restraint. “She has the most established economic position so far. She has published well-drafted position papers on economic issues, something Mr Trump has not.”
But does he think Mr Trump can win? “Do you think Brexit could happen?” he says, referring to Britain’s impending referendum on EU membership. “It is very hard to predict the politics of anger.”
Mr El-Erian, who told an audience of asset management executives in Berlin that a UK exit from the European Union may be a necessary evil to secure the future of the political bloc, believes there has been an erosion of trust in what he calls the elite classes, be it those in the public or private sectors.
He says: “The most striking element when you look at the US or Europe is the emergence of anti-establishment movements. There is nothing surprising in this, however, because if you run sophisticated economies at low growth for a long time, and if the benefits of that low growth only go to a very small section of society, then people will get angry.
“That is why we are seeing the emergence of Donald Trump, why the UK is having a Brexit referendum, and why an extreme rightwing party almost won the election in Austria.”
He suggests the political classes need to “step up” and do more to boost economic growth to remedy these issues, rather than relying on central banks, in particular the US Federal Reserve, to solve these problems for them.
“There needs to be a handoff in the US, Japan and Europe from excessive prolonged dependence on experimental central bank policy to a comprehensive policy response from governments. Otherwise central banks go from being effective to ineffective to counterproductive.”
In reference to the US specifically, he says: “We fell in love with finance as the engine of growth and now realise that we need to go back to some basic issues. We need infrastructure spending, we need tax reform and we need labour-market reform. None of these things the Fed can do.”
The former deputy director of the International Monetary Fund expects one, if not two, US interest rate rises this year and believes the Fed has done a very difficult job well.
“It is not easy being the only game in town [a neat reference to the title of his latest book]. You have to think of the Fed as a doctor. And when a doctor walks by a patient and senses that patient is not doing well, then the doctor will do his or her utmost for them, even if they don’t have the right medicine.”
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