Pacific Investment Management Co., the world’s largest active bond manager, said investors should cut risk amid a more than 60 percent chance of a global recession in the next three to five years.

Global growth will slow, keeping inflation in check, and “economic volatility” will increase, Saumil Parikh, a portfolio manager at Newport Beach, California-based Pimco, said in a report being posted on the firm’s website today. Investors shouldn’t add risk in the search for yield, he said.

“The global economy experiences a recession every six years or so, and the frequency of global recessions tends to increase when global indebtedness is high and falling as opposed to when indebtedness is low and rising,” Parikh, who focuses on asset allocation, multisector fixed income and absolute-return portfolios, said in the report. The last global recession was four years ago, he said.

Bill Gross, Pimco’s co-founder and co-chief investment officer, said in a Bloomberg Television interview last week he’s sticking with high-quality bonds as market risks are rising and stocks, high-yield debt, currency and emerging-market bonds are all in “disarray.” Global bonds had their worst month in nine years in May, led by Treasuries, as investors sold debt in anticipation central banks will eventually scale back their unprecedented asset purchases.

Bonds will deliver nominal returns from 1 percent to 2 percent and stocks will return about 5 percent, Parikh said. Those return estimates are 2 percent to 3 percent below their historical averages over the past 100 years relative to inflation, Parikh said.

The most attractive nominal government bonds include those issued by Australia, New Zealand, Sweden, Mexico and Brazil, while for inflation-linked bonds, long maturity exposures in the U.S., Brazil, Italy and Chile are opportunities, he said. Pimco likes emerging-market equities such as Chinese non-financial stocks and Spanish and Irish companies. Stocks in Japan, the U.S., Germany, Australia and Mexico should be reduced because they’re too expensive and have muted growth prospects, Parikh said.

Pimco, a unit of Munich-based insurer Allianz SE, managed $2 trillion in assets as of March 31. Gross runs the $285 billion Pimco Total Return Fund, the biggest bond fund in the world.