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The Pharaoh’s Dream

April 19, 2013

 

Thanks to central banks’ ultra-loose monetary policies, financial markets have delivered five consecutive years of handsome capital market returns since 2008.
-Andrew Bosomworth, managing director, PIMCO

  • As yields on assets decline, central banks’ ultra-loose monetary policies are effectively forcing investors further out the concentric circles into lower quality, more illiquid sectors in search of positive yielding assets after deducting inflation.
  • In order to achieve 6%-7% returns in the future, investors may be required to take on more risk. Meanwhile cash equivalents, typically the safest alternative, yield literally nothing.
  • Allocating part of a portfolio away from “middle circle” asset classes into assets with higher return potential as well as assets offering liquidity is the right strategy in our opinion.

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