Also, the rare world of fund/financial managers ... where $5-10 million a year is a major decrease in compensation ... a compensation that is hard to live on and hard to find 'qualified' candidates for ...
Fund Chief at Harvard Will Depart
The manager of Harvard’s endowment fund for almost two years, Mohamed A. El-Erian, announced unexpectedly yesterday that he was leaving to return to the Pacific Investment Management Company, where he had worked for seven years.
In a long, if cryptic, statement, Mr. El-Erian said that he was returning to Southern California at the end of the year to be “closer to our family.” His wife and young daughter moved to Boston with him when he joined Harvard. He declined to comment further yesterday.
At Pimco, Mr. El-Erian, 49, will step into the newly created position of managing director, co-chief executive and co-chief investment officer in January. In that post he will join the founder, William H. Gross, 63, and the chief executive and chief investment officer, William S. Thompson Jr., 62, as a member of the senior management team.
When he left for Harvard, Mr. El-Erian had been managing director and senior portfolio manager, overseeing the $28 billion emerging markets bond fund. He will have broader responsibilities in his new role. But Pimco said in a statement that neither Mr. Gross nor Mr. Thompson planned to step down.
Mr. Gross’s statement was particularly enthusiastic about Mr. El-Erian’s return. “I am ecstatic,” he said. “to have him join Bill Thompson and me.”
Pimco manages more than $690 billion, which includes the $103 billion Pimco Total Return bond fund.
The news surprised Harvard insiders and fund managers alike. Winning the plum job as head of the Harvard Management Company, the nation’s largest university endowment, had been considered a coup for Mr. El-Erian in October 2005. Harvard officials said at the time that he was chosen because his broad views on global economies would be useful in managing a diverse portfolio.
Moreover just last month, Harvard reported its results for fiscal 2007, ended June 30. The endowment had a 23 percent return, which took the fund’s total to $34.9 billion. That was considered a strong performance, particularly because the size of the endowment presents unusual challenges and because Mr. El-Erian had to rebuild much of the fund’s team after the former head, Jack R. Meyer, took several people with him when he left to start a hedge fund, Convexity Capital Management.
Certainly Mr. El-Erian’s abrupt announcement will raise questions about his decision to leave.
At Pimco, Mr. El-Erian made tens of millions, according to several people who know him. Though he was only at Harvard for half of fiscal 2006, he earned $2.3 million. The fiscal 2007 figures are not yet available.
An associate who did not want to be identified because he had not been authorized to discuss the matter said yesterday that Mr. El-Erian’s wife and daughter were not happy in Boston.
Jay O. Light, dean of the Harvard Business School and a board member of the Harvard Management Company, said that he had known of Mr. El-Erian’s plan for several weeks and that “Mohamed has been thinking about this long and hard.”
Mr. Light said that Mr. El-Erian “has done a great job of building the internal and external platforms; I think he has put in place great people.”
Harvard’s performance was crucial in August, a tumultuous month for the markets, because it had an investment in Sowood Capital Management, a hedge fund that lost half its value. Under Mr. Meyer, Harvard had invested $500 million in 2004.
Despite the Sowood loss, which cost Harvard $350 million, the endowment was up marginally in July. A money manager close to Harvard said that some people were concerned that Mr. El-Erian had not seen the Sowood losses coming, especially since it involved bonds, which is his area of expertise. But Mr. Light said, in relation to Mr. El-Erian’s record that “Sowood was a nonevent.”
And Byron Wien, chief investment strategist at Pequot Capital Management and a Harvard alumnus contributor and fund-raiser, said: “In my encounters with Mohamed I was very impressed with his breadth of insight into what was going on in the world and its impact on the financial markets.”
Certainly more instability is not welcome news at Harvard, which faces the challenge of finding another leader for the management company. Mr. Meyer left in 2005 after 15 years, partly out of exasperation over criticism of a compensation program that paid some of his top managers $17 million or more.
Finding a leader with enough experience who is willing to work for less than the huge pay that one can make on Wall Street is not easy. And it could mean restructuring much of the management team again if a newcomer has an approach that differs from Mr. El-Erian’s.
Already yesterday there was speculation about the successor. One name mentioned was Steve Galbraith of Maverick Capital, who was mentioned during the last search. He could not be reached for comment yesterday.
Still Mr. Light sounded positive. “We are in good shape,” he said. ”There is no doubt about it. The numbers are clear.”