Andreas Utermann

Stop the Currency War

andreas utermann_Bert Bostelmann for Handelsblatt_close up
Andreas Utermann warned that social inequality is a growing. He said the only people benefiting from low interest rates are the wealthy.
  • Why it matters

    Why it matters

    Mr. Utermann, who manages hundreds of billions of euros, warns that a global currency war is hurting all of the world’s biggest economies and increasing inequality.

  • Facts


    • Allianz Global Investors manages more than €440 billion in assets and is a subsidiary of Munich-based insurance giant Allianz.
    • Mr. Utermann calls for a new Louvre Accord along the lines of the 1987 deal reached between western nations to halt a series of competitive currency devaluations.
    • He believes the wealthy have benefited most from the central banks’ low interest-rate policies, and voiced concerns about economic weakness and social implications of the growing income and wealth gap.
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Top managers are at home everywhere and nowhere. This is especially true of Andreas Utermann, the new head of Allianz Global Investors, a subsidiary of German insurance giant Allianz.

He said he has no office in Frankfurt, where the company is based, because it simply isn’t worth it. In fact, he added, this interview marks only the second time he has been to the city this year.

Mr. Utermann, 50, has been the chief executive of Allianz Global Investors for just over a month, a position in which he succeeds pioneering female top executive Elizabeth Corley. He has also retained his role as global chief investment officer.

Allianz Global Investors, a subsidiary of the Munich-based insurance giant Allianz, is a broad investment company. It manages assets of more than €440 billion ($501 billion) for private investors, family offices and institutional clients, and employs more than 500 investment specialists.

A British citizen born in Brussels, Mr. Utermann has worked for AGI since 2002. Before that, he spent 12 years with Merrill Lynch Investment Managers. Over his career, he has developed a precise way of thinking and prefers to deviate from the herd when it comes to his thoughts on business and investing. He forms his own picture.

Mr. Utermann displayed some of that a-typical thinking in this interview. Among other things, he warned that Germans are “saving ourselves to death” and argued the wealthy have benefited most from the central banks’ low interest-rate policies.

He also warned that a war of currencies between the world’s major economies needs to be stopped. The European Union, United States, China and Japan are all trying to achieve growth by weakening their own currencies through their central banks.  To end the battle, Mr. Utermann called for a new global currency deal, along the lines of the Louvre Accord reached between western nations in 1987.


Handelsblatt: You manage more than €440 billion, much of it in fixed-interest securities. But yields are declining because of the low interest-rate policies of central banks. Do you still feel that there are prospects for the market?

Andreas Utermann: From a broad perspective, the bond markets will not offer any significant returns anymore. German government bonds with short maturities even have a negative yield today. But there are other bonds out there, such as corporate bonds or bonds issued by emerging economies.

Banks have also withdrawn from bond trading, which makes it more difficult to trade the securities. Does this reduced liquidity constitute a risk?

It’s clearly a problem, and it’s getting bigger. For instance, it means that sellers are getting lower prices. We as fund managers must be careful to ensure that, through greater quality control, we can to a relative degree hold a bond until maturity. We also hold larger cash positions in our funds.

The prices of government bonds from southern euro-zone countries have gone up again. Is this a signal that the euro crisis has intensified again?

It worries me. The central banks’ efforts to relax monetary policy in recent years have been unsuccessful. Growth hasn’t increased sufficiently to be enough to reduce debt. And we’re not even in a recession. It’s hard to imagine what would happen if we were.

Are there other problems?

I see two major challenges: one is economic weakness; the second one is the growing inequality of income and wealth, which is socially explosive. It’s a consequence of globalization. The typical middle-class citizen has lost out. Companies have outsourced work to other countries. Everyone in the Western world can feel these costs of globalization directly. But the advantages that come with a larger pie are not as directly apparent. In contrast, globalization has increased prosperity in emerging economies.

How do the central banks come into play?

Through their low interest-rate policy. It has driven up asset values and made debt financing easier. And who benefits from all this? Mainly rich people. On balance, this means that the rich have gotten richer. That’s the challenge.

Can it be resolved?

Do we have to completely change the way we think, I ask myself? The economy should be booming, because we have pumped massive amounts of money into the system in the last eight years. So now we’re injecting even more money, making interest rates even more negative and initiating currency devaluations. This will go on like this for another year or two.

But how else are we supposed to grow?

In the United States, Japan, China and Europe, there is a great temptation to achieve growth by devaluing the currency. This is a direct consequence of quantitative easing. We saw it with the yen and the euro, and now we’re seeing it with the yuan. Perhaps the dollar will also become weaker in the end.

But you can’t have everyone devaluing his currency against everyone else’s currency. Where does this lead?

Things would become critical if, for example, the European Central Bank could not relax its monetary policy any further, causing the euro to rise against the dollar. Economic growth, which is already weak, would be jeopardized. And the euro is indeed stronger again. As expected, the Fed has left interest rates unchanged for now. In light of the robust U.S. economy, the Fed is still likely to increase rates again this year.

Is it possible that the prescribed treatment is the biggest problem?

Yes, that’s absolutely right. Perhaps this negative interest-rate policy will even fuel people’s distrust of the system. If that happened, people would stop spending money. In other words, we would only be making the problems worse.

How do we get ourselves out of this dilemma?

Let’s try to stop the currency devaluation race. Western countries can agree to a new version of the 1987 Louvre Accord, in which the governments and central bankers of the six large western industrialized nations agreed to keep their exchange rates within certain ranges.

After all the bad experiences, can this even work anymore?

Only if the underlying conditions are changed. We need to treat debt differently in terms of taxation. The current monetary policy is having an absurd effect, namely that negative interest rates are only aggravating the real problem that there is still too much debt. But there’s more to it than that. If you borrow money, as a business owner or a private citizen, you receive tax benefits. Conversely, equity capital is handicapped from a tax perspective. I call that insanity to a higher power.

But countries aren’t about to tax their own debt, are they?

The central banks can solve that problem. Government bonds always end up on the balance sheets of the central banks. The Japanese are very advanced in this regard. For instance, hardly any private investors voluntarily own government bonds anymore.

So how much can the European Central Bank buy up?

I don’t know. That’s a political issue. We Germans face a special and existential question: If the rest of the world is getting into a lot of debt, and we are the only ones to keep our budget under control, is this even worthwhile anymore? Germany has developed foreign trade and current account surpluses, that is, has built up assets abroad…

…so it’s created a dependency?

Exactly. If the rest of the world went bankrupt, it would either not repay its debts or perhaps even devalue its currency, as well. This is why solid budget management is absurd. We are saving money in the knowledge that our savings could be worth a lot less in a few years. I may have kept my financial house in order, but what for? This is the mistake we make: We don’t distinguish between what makes sense for the individual and what is good for a society in the context of the global economy. It’s absurd.

How do we get out of this absurd state, in your view?

By agreeing on exchange rate conditions, as I already mentioned, and with the structural solution to the debt problem that I mentioned. The euro zone countries that are more deeply in debt need to manage their economies in a more stable manner, and Germany should increase its debt. Otherwise, we’ll be saving ourselves to death while the others are getting nowhere.

So you think everything points to a doomsday scenario?

No, I’m an optimist. I expect that we’ll rethink at the last moment. Maybe the British will help. They already question the rigid E.U. construct – and justifiably so.

And how does an optimist like you invest his own money?

I own a lot of real estate, but also direct investments in young companies. For my children, I only invest in stocks.


Robert Landgraf  and  Ingo Narat conducted the interview. Mr. Landgraf is Handelsblatt’s deputy financial editor. Mr. Narat is an editor for Handelsblatt covering investing out of Frankfurt. To contact the authors: and


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