Mather, 45, one of three managers who took over the Pimco Total Return Fund for Gross, said the dollar “starts from a very cheap point in valuation. We have real growth differentials which favor the U.S.”
Today’s Federal Reserve is far different from previous versions of the central bank, he said.
“This is a Fed you can describe that they’re really in the variety of inflation cheerleaders,” Mather said. “They actually want inflation near term to go above target. And we think that they’ll be successful.”
No ‘Apocalypse’
At 1.5 percent in the year ended in August, the Commerce Department’s inflation rate tied to consumer spending, the Fed’s preferred measure, has fallen short of the central bank’s 2 percent goal for more than two years.
Investors shouldn’t fear a bond-market collapse, said Mather, whose firm is based in Newport Beach.
“Even while interest rates rise, we think we can deliver returns that are substantially above inflation over the next several years,” he said. “It’s not a situation where we should be concerned about a bond-market apocalypse or about suffering negative rates of return because inflation will be picking up.”
Investors redeemed a record $23.5 billion from the Total Return fund last month. The largest amount occurred on the day Gross, who built it into the world’s largest bond fund, left the company. Assets had peaked at almost $300 billion in early 2013 after Gross posted one of the industry’s best long-term records.
The Total Return Fund gained 4.1 percent this year through Oct. 21, outperforming 36 percent of comparable funds, according to data compiled by Bloomberg.
Pimco also likes Treasury Inflation Protected Securities, short-dated corporate bonds, sovereign debt from countries such as Spain, Italy and Mexico, and non-agency mortgages, according to Mather’s presentation.