Investment News recently interviewed Mohamed El-Erian, former Chief Executive of PIMCO and current Chief Economic Advisor at Allianz, in the piece, "How Long Can the Good Times Last?" While mainly on the economy and bond issues, the article also says, "You were recently quoted saying you are building up reserves in your personal portfolio. Does that suggest you're feeling risk-averse?" El-Erian answers, "Like many other investors, I have benefited from a very unusual trifecta, which is, one, significant returns; two, correlations that have broken down in favor of investors, in the sense that both risk assets and risk-free assets have gone up in price; and three, extremely low volatility." He continues, "Having said that, the longer this trifecta continues, the greater the risk of a change. So what I have done is very slowly and gradually reduced my exposure to public markets, both equities and fixed income, and allocated that reduction to two alternatives. One is cash, which provides two things in this environment: risk mitigation and the optionality to pick up good companies at depressed prices should we have a liquidity event. Then, with a smaller portion of the reduction in exposure to public markets, which has been very gradual and slow, I've looked for two types of opportunities. One is distressed situations where the sell-off far exceeds the worsening fundamentals, and the second is what I call market failures. What it looks like from the outside world is a gradual move to a more barreled approach. The middle of the curve is slowly coming down. One side is true risk-free asset, which is cash, and that's going up. The other side is the less liquid, more opportunistic exposure, and that's slowly going up."

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