Mohamed El-Erian, the chief economic adviser at Allianz SE (and former partner with Bill Gross at PIMCO), is known as a straight shooter and a canny investor willing to take calculated risks. Speaking at a conference on Tuesday of this week, El-Erian noted he currently saw opportunities for active investors in emerging markets. He also commented that political pressure on the U.S. Federal Reserve (mainly from the right wing) could lead to a dangerous erosion of the important institution’s autonomy.
El-Erian spoke Tuesday afternoon at the Reuters Global Investment Outlook Summit in New York City, arguing that financial markets had “overreacted” to recent problems in the emerging markets, and a number of EM issues offered good value today.
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More on recent El-Erian comments on emerging markets
Although El-Erian commented that emerging markets still remained “challenged,” he went on to say that he did see opportunities, but it would probably require active strategies instead of passive exchange-traded funds to do well.
“I wouldn’t go out and buy an (emerging market) ETF,” El-Erian emphasized. “Active management is an important issue in this asset class.”
In his comments, the famous fund manager also mentioned that the push to “audit the Fed” clearly posed a risk to the central bank’s autonomy. El-Erian said the only reason why the Fed was able to help the U.S. stave off a major depression in 2008 and 2009 was its autonomy from the nonsense of the political system in Washington.
“There’s now a tendency for the politicians to get more involved,” El-Erian pointed out. “I’m less worried that the Fed will behave in a certain way because it has political pressure on it, but I am worried that we risk eroding the operational autonomy of the central bank.”
His comments were directed at recent congressional efforts to force the Fed to undertake a complete audit, and other proposed measures that would limit the central bank’s authority. Republican lawmakers together with a few Democrats have been leading the charge to limit the power of the Fed and force it to become more transparent.
El-Erian also repeated his belief there was 70% chance that the Fed would increase interest rates for the first time in nearly a decade in December.