-- Investors should buy emerging- market debt rather than bonds of developed countries because advanced economies are poised for a period of slower growth, according to Pacific Investment Management Co.
Increased taxation, regulation and government intervention in business combined with financial companies’ efforts to reduce risk after the credit crisis will drive investors from developed economies, Brian Baker, Pimco Asia Ltd.’s chief executive officer, said in Hong Kong yesterday.
“This all leads to a shift away from growth being driven by the G3 countries to a more balanced economic world,” Baker said at the FundForum Asia conference. “Investors need to recognize that the investment opportunities are not going to necessarily be in the U.S., the U.K and Europe any longer.”
Pimco, which manages the world’s largest bond fund, increased holdings of emerging-market debt to the most since 2008 last month while reducing its portfolio of developed nations’ non-dollar bonds. Emerging debt at Pimco’s $220 billion Total Return Fund rose to 6 percent of assets from 5 percent in February, and non-dollar bonds of developed countries declined to 18 percent, the Newport Beach, California-based company said on its Web site.
Investors are favoring emerging-market bonds as China, India and Brazil spur the global economic revival. Emerging economies will expand 6 percent this year after growing 2.1 percent last year, while advanced economies will grow 2.1 percent after shrinking 3.2 percent, according to International Monetary Fund forecasts.
Developing-nation debt funds received an unprecedented $1.8 billion in the week to April 16, lifting 2010 inflows to a record, according to research company EPFR