By Jennifer Ablan

NEW YORK (Reuters) - Investors should cut risk by placing money in real assets and accept lower returns, given that markets no longer offer double-digit gains in a zero interest-rate environment, said Bill Gross, a portfolio manager at Janus Capital Group Inc <JNS.N>.

"Negative returns and principal losses in many asset categories are increasingly possible unless nominal growth rates reach acceptable levels," Gross said in his latest Investment Outlook note published Wednesday.

"I don’t like bonds; I don’t like most stocks; I don’t like private equity. Real assets such as land, gold, and tangible plant and equipment at a discount are favored asset categories."

The views from Gross come in the wake of the recent run-up in the benchmark Standard & Poor's 500 index and Treasury bond market rally.

His views also follow remarks by Jeffrey Gundlach, the chief executive of DoubleLine Capital. Last week, Gundlach told Reuters: “The artist Christopher Wool has a word painting, 'Sell the house, sell the car, sell the kids.' That’s exactly how I feel – sell everything. Nothing here looks good.”

Gross, who runs the $1.5 billion Janus Global Unconstrained Bond Fund, said capitalism cannot function efficiently at zero-bound rates.

He reiterated low interest rates may raise asset prices, but they destroy savings- and liability-based business models in the process.

"Banks, insurance companies, pension funds and Mom and Pop on Main Street are stripped of their ability to pay for future debts and retirement benefits," he said. "Central banks seem oblivious to this dark side of low interest rates. If maintained for too long, the real economy itself is affected as expected income fails to materialize and investment spending stagnates."

Overall, global monetary policies cannot succeed without nominal growth, Gross said. "The reason nominal growth is critical is that it allows a country, company or individual to service their debts with increasing income, allocating a portion to interest expense and another portion to theoretical or practical principal repayment via a sinking fund," Gross said.

"Without the latter, a credit-based economy ultimately -devolves into Ponzi finance, and at some point implodes. Watch nominal GDP growth."

Gross said in the United States, 4-5 percent nominal GDP growth is necessary, in the euro zone 3-4 percent nominal GDP growth and in Japan 2-3 percent nominal GDP growth.

The Janus Global Unconstrained Bond fund is up over 4 percent so far this year, surpassing 69 percent of its peer group, according to Morningstar.

(Reporting by Jennifer Ablan; Editing by Andrew Hay and Jonathan Oatis)