El-Erian: The era of “passive investment” is over

El-Erian: The era of “passive investment” is over
El-Erian: The era of “passive investment” is over
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(agencies)
Muhammad Al-Erian, chief economic advisor at Allianz, said: “In light of the current increasingly deteriorating economic climate, which is suffering from a rise in interest rates and a decrease in liquidity, it can be said that the time for passive investment is over, and it is time to return to positive or (active) investment.” ».
The economist indicated in an article in the “Financial Times” that for more than a decade, investors used to live in an environment of artificially low interest rates with government cash injections, which led to raising almost all assets in all areas, but this environment has lost its attractiveness. Today it no longer exists. Pointing to the slowdown of the three most important economic axes in the world, which are the United States, Europe and China.
The Federal Reserve raised the benchmark interest rate by 75 basis points four times last year, moving from about “zero” to 4.5%, in an attempt to calm inflation that reached its highest level in 40 years.
Al-Erian added, “We are in an investment world where greater selectivity, smart structuring, and flexible asset allocation often outweigh the lower fees of passive investments.”
He explained that in the past, there was no urgent need to search for individual investments, given the potential for high returns amid low volatility. But companies began to roll out passive portfolios, as competition among them drove down fee costs, and they began to build riskier parts of the market into products.

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