Sophisticated investors with access to certain markets can find "massive opportunities" amid a tricky macro outlook, according to Mohamed El-Erian, chief economic advisor at Allianz and chair of Gramercy Fund Management. Speaking to CNBC at the Adipec energy conference in Abu Dhabi, El-Erian said public stock and bond investors had to adopt a real "tactical mindset" to navigate what he termed a "huge liquidity wave." Markets have been underpinned since the coronavirus pandemic by an unprecedented arsenal of fiscal and monetary stimulus from governments and central banks, and El-Erian suggested the main risk to the recovery that has pushed global stocks toward new highs is a central bank policy error. "Every smart surfer knows that at some point, the wave is going to break, and you do not want to have it break on your head," he said. "[The wave] continues for now, it brings record after record, but just be careful." But despite the choppy outlook for retail investors, El-Erian argued that investors with access to the private markets had plenty of avenues through which to deliver returns. "There are failures going on in private markets that public markets' money cannot get to. You see this most importantly in emerging economies," he explained. In particular, he highlighted instruments to invest in the debt of Pemex, Mexico's wholly state-owned petroleum company. "If you lend directly to Pemex or if you lend to a supplier to Pemex that is secured by Pemex receivables, these two in terms of credit are the same risk," he explained. El-Erian highlighted that while the latter strategy is less liquid, its average maturity ranges from six to 10 months, and it yields interest 10 percentage points higher than lending directly to Pemex, due to its comparative exclusivity. "So if you are a sophisticated investor and you have access to private markets, to venture [capital], to smart structuring, to legislation finance, there's a whole list of things that make sense here."
Heidi Gutman | CNBC
Sophisticated investors with access to certain markets can find "massive opportunities" amid a tricky macro outlook, according to Mohamed El-Erian, chief economic advisor at Allianz and chair of Gramercy Fund Management.