Mohamed El-Erian manages Harvard University's $30 billion endowment. In a special three-part "Power and Money" interview, El-Erian spoke with Michelle Caruso-Cabrera to discuss inflation, private equity, the global economy and the "long-term themes" that guide him in investing Harvard's money.
Part 1: Global Newcomers
El-Erian describes the emergence of the middle class in China and India, and the creation of a housing market in South and East Asia. He believes that Shanghai is composed of "several markets," which will open more and more to foreign capital. And he says that over the next five to 10 years, investors should plan on the return of worldwide inflation; he names the sectors to play that scenario.
Part 2: U.S. and The World
America sneezes and the world gets a cold? El-Erian sees the global economy "decoupling" from the United States as the U.S. slows down; but he sees exports as a compensating factor that will prevent a major recession. He speaks of the Federal Reserve's "dual mandate" amid contradictory signals -- and takes on Warren Buffett's condemnation of derivatives.
Part 3: Bigger Pockets, Same Goals
More thoughts on Buffett, and how El-Erian's strategy differs. He speaks of the growing appeal of large-cap equities and the need for diversification to mitigate risk. And he says that while Harvard's access to world markets may outreach that of the "average person," the investment targets remain the same.