Prudential Chief Echoes Dimon Saying Liquidity Is Top Worry

‘Favorite Move’

Hunt, who joined Newark, New Jersey-based Prudential Investment as CEO in November 2011 from McKinsey & Co., said “without a doubt” the firm’s “favorite move at the moment is in the U.S. corporate credit market.” Interest rates in the U.S. will probably remain low for some time even with a probable rate increase by the Fed in the second half, he said.

“They’ll move a little bit and then they are going to wait and watch and they may not move again for a bit, so we are again quite sanguine,” Hunt said. “I think they don’t want to move too quickly and bring on any kind of recessionary force.”

Slowing growth in China will help keep inflation down and disappoint some who are betting on increased demand from the world’s second-biggest economy based on past data, Hunt said.

Pimco Emotions

“There is serious overcapacity driven by building for a China that is probably not going to quite come into fruition,” Hunt said. “There’s overcapacity in a lot of the world’s industries that will be laid bare by these lower rates.”

Prudential is more optimistic than many about recovery prospects in Japan and Europe and is overweight equities from those areas. Prudential also likes high-yield bonds in the U.S. not tied to the energy sector, he said.

Assets at Prudential’s fixed-income business rose to $543 billion at the end of December, up from $418 billion in March in 2014, the company’s website shows. Following the surprise exit of co-founder Bill Gross from Newport Beach, California-based Pacific Investment Management Co. last year, the Pimco Total Return Fund alone suffered more than $100 billion in redemptions. Pimco’s troubles left him with mixed emotions, Hunt said.

“It is never a good thing, when I would say, a deeply respected firm and a firm that had done extremely well by its clients for many, many years comes a bit unstuck,” he said. “That said, there has been a lot of money that has moved and I do feel quite good that we’ve gotten our fair share of that money that has come out. But I would say that we are also happy to see that the firm seems to have stabilized and we wish them well.”