Fortune editor Geoff Colvin has a great interview with Pimco giant Mohamed El-Erian. Among other things, Mr. Colvin asks him what investors will have to do differently going forward to cope with the new environment. Mr. El-Erian’s response is quite direct:
The average investor has two issues today. First, the average investor is too U.S.-centric. There’s a reason for that; the behavioral finance people will tell you that we like the familiar, so we tend to invest in names that we know, that give us comfort.
The problem is that you don’t want to be too U.S.-centric in a globalizing world where the center of gravity is shifting. So the first thing for the average investor to recognize is that the asset allocation of tomorrow is much more global than the asset allocation of yesterday.
Second, most of us have been very lucky — we haven’t had to worry about inflation for a long time. We’re moving toward a much more fluid world in which, at some point, inflation will come back.
Getting more global is what our Systematic RS Global Macro account is all about. In addition, Mr. El-Erian suggests that the individual needs access to alternative assets, specifically an inflation hedge. Global Macro covers the waterfront here too, with baskets for assets from inflation-protected bonds, to precious metals, basic materials, energy, and other commodities, to real estate and foreign currencies. All of these asset classes have typically been available in the past only to qualified investors through a limited partnership format that also has leverage, high fees, and a lockup period. Global Macro is available as a separate account and through the Arrow DWA Tactical Fund (DWTFX)-no leverage, standard fees, and no lockup.
Most important, the Global Macro portfolio comes along with a systematic method for determining when and how much exposure to take in various asset classes as conditions change. It might be just what’s needed in the new world order.
Click here to visit ArrowFunds.com for a prospectus & disclosures. Click here for disclosures from Dorsey Wright Money Management.
