Hire Alan Greenspan and cash in: pimco chief

One suggestion is to hire Alan Greenspan.

Bill Gross, co-chief investment officer at Pacific Investment Management (Pimco), said Alan Greenspan was a consultant to the world's biggest bond manager.

"He's made and saved billions of dollars for Pimco already," Gross was quoted by Bloomberg as saying on Tuesday during a conference organised by the Asia Society in Los Angeles, California.

Since retiring as head of the Federal Reserve in January 2006 after 18 years, Greenspan signed on as consultant to Newport Beach, California-based Pimco and hedge-fund firm Paulson and Co. Greenspan guided the US economy through its longest expansion and became known for often-cryptic congressional testimony and phrases like "irrational exuberance" that shook up global markets.

During a 30-minute discussion on banks several months before the global credit crisis, Greenspan's "brilliance in terms of forecasting the potential for exactly what happened was a big money saver for us", Gross said.

Defaults of sub-prime mortgages in the US have triggered a worldwide credit crunch, with banks and financial institutions facing more than US$380 billion (12.11 trillion) in write-downs and losses related to bad debt.

Pimco, a unit of Munich, Germany-based insurer Allianz, manages more than $800 billion worth of assets. Gross anticipated the collapse of the US housing market and the Federal Reserve's subsequent interest-rate cuts. He shunned riskier corporate debt in 2006, a call that caused his fund to lag behind peers. Gross's $128-billion Total Return Fund slipped as much as 4 per cent in the first half of 2006.

Over the past year, the decision to sidestep sub-prime-linked debt has helped the fund, which has surged 12 per cent in the past year to beat 95 per cent of its rivals, data compiled by Bloomberg show.

Earlier this year, Gross started piling back into mortgage loans, to take advantage of slumping prices. Last month, he lifted his holdings in mortgage-related debt to the highest since 2000 and lowered his stakes in US treasuries after calling them "overvalued".

As of April 30, Gross's Total Return Fund held 65 per cent in mortgage debt, data posted on the firm's website show. The fund also holds 6 per cent of assets in emerging-market debt. This year, Gross's Total Return Fund has returned 4.1 per cent, beating 94 per cent of peers, Bloomberg data show.