Asset prices have been pushed higher thanks to the Federal Reserve's monetary policy, but because there's uncertainty over whether the central bank will be able to deliver better economic fundamentals, Allianz chief economic advisor Mohamed El-Erian said he's taken some money out of the market.
While he doesn't think the market will have a "major" problem when the Fed begins raising interest rates, he's made his portfolio much more "barbelled," he told CNBC Monday.
"I've taken some exposures out of the public markets, which are heavily trafficked because that's where the Fed has been pushing everybody, and I've taken some in cash [and] some in higher risk, less liquid exposure," El-Erian said in an interview with "Closing Bell."
"As long as we don't get the better economic fundamentals, we are at risk of not validating the higher asset prices."
Meanwhile, short term, stocks are getting support from not only the Fed, but cash that is being deployed back into the market in the form of stock buybacks, El-Erian noted. However, he said that has a limit and at some point there must be a handoff from central banks to corporate investment in equipment and hiring.
The former Pimco CEO still believes the Fed will begin raising rates in September, but said it will be "the loosest tightening" the Fed has ever done.
"We're going to end way below historical levels," El-Erian said. "The Fed is going to work very hard to get us off the obsession of the date and focus more on what is going to be a very, very gradual journey."
Meanwhile in Europe, the European Central Bank will do what it can to help Greece, he said, because it doesn't want to cause the first exit from the euro zone. However, his greatest worry is that there will be an "accident," like capital controls or small defaults, that will ultimately push Greece out of the euro zone.
Short term, a Greek exit will shock the market, but long term it won't make a huge difference, El-Erian said.