World’s Largest Asset Manager Likes “Inflation Linked Bonds And Gold As Diversifiers”

BlackRock Inc. has joined Pacific Investment Management Co. (PIMCO) in recommending inflation-linked bonds and gold, warning costs are poised to pick up and there is a growing risk of inflation.

“We like inflation-linked bonds and gold as diversifiers,” said New York-based BlackRock which is the world’s largest asset manager, managing $4.6 trillion, reported Bloomberg.

“Stabilizing oil prices and a tighter labor market could contribute to rising actual, and expected, U.S. inflation,” Richard Turnill, BlackRock’s global chief investment strategist, wrote Monday on the company’s website.

“If you look at inflation expectations as they are reflected in the bond market we think they are too low,” Joachim Fels, global economic adviser for Pimco said in an interview on Bloomberg Television. “We still think markets are pricing in too low a profile for inflation. We don’t think inflation will move significantly above central bank’s targets, but we think that there’s a good chance that over the next 12 months or so, particularly in the U.S., that we will get back to 2 percent.”

“We like Treasury Inflation Protected Securities,” Pimco’s Worah said in a video on the company’s website this month. “The market is pricing 1 percent inflation in the U.S. for next year. We think it’s likely to be closer to 2 percent.”

“We may well at present be seeing the first stirrings of an increase in the inflation rate — something that we would like to happen,” Stanley Fischer, vice chairman of the Fed Board of Governors, said this month.

PIMCO already recommend owning gold as part of diversified portfolios. In 2013, they introduced a ‘Multi Real Asset Strategy’ specifically created to tackle “inflation risk”.

“The strategy tactically invests in multiple inflation-sensitive asset classes, allocating across a broad opportunity set of real assets, including global inflation-linked bonds, commodities, real estate, currencies, and gold …Gold has characteristics of both a commodity that is easily stored for a long period of time and a currency whose supply is limited.”