Global bonds guru Bill Gross, chief investment officer of Pimco, told CNBC Wednesday that he is making a shift towards equities.
“We are making a move into equities, period,” said Gross. “We are recognizing that the global marketplace is not just bond-oriented, and so equities have a place, always have had a place.”
The move marks a shift in investment strategy for Pimco, renowned for its expertise in fixed income.
“Corporate equities, in terms of valuation, are selling at very low P/E ratios and in some cases might be perceived to be almost as safe, or almost as secure as the sovereigns themselves,” said Gross.
And despite significant debt problems the euro zone’s currently facing, he believes the region is the best place to pick up equities, citing their international exposure, privately run nature and relatively skinny balance sheet.
But returns at this point, will be small, Gross noted.
“Revenue growth cannot be expected to do much better, or much worse,” he said, adding that European companies with international focus will do well, as they are able to reap returns from developing nations with stronger growth.
Gross, who manages the world’s biggest bond fund worth $1 trillion, maintained that U.S. Treasurys are still the “go-to” flight to safety trade as it represents the world’s reserve currency.
When asked whether bonds issued by embattled BP are safe bets, Gross revealed that although the energy giant does offers value, Pimco does not own a lot of its paper as there is “simply too much of a risk to assess at the moment.”
With regards to ratings agencies, which have been heavily criticized for assigning overly rosy ratings on dubious financial offerings, he believes there is a need for regulation.
“Rather than respect them, I think investors are basically in the process of dismissing them,” noted Gross.
