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Pimco Exec Is Lured to Harvard

October 15, 2005|Tom Petruno | Times Staff Writer

Mohamed El-Erian, one of the star managers at Newport Beach-based investment giant Pimco, was named Friday to oversee Harvard University's $26-billion endowment portfolio, the largest such university fund.

Harvard said it chose El-Erian, 47, in part for his global perspective. As head of the emerging-markets debt team since 1999 at Pimco, or Pacific Investment Management Co., he has become the world's single biggest investor in bonds of developing countries such as Brazil, Russia and Mexico.

El-Erian will be chief executive of Harvard Management Co., which directs the Cambridge, Mass.-based university's investments.

He succeeds Jack Meyer, who left Sept. 30. Meyer generated strong returns for the fund over the last 15 years, but his tenure also was marked by controversy over his pay level.

Like many of his Pimco cohorts -- including Bill Gross, the firm's chief investment officer -- El-Erian has been outspoken on economic and market issues. He has attacked brokerages for what he called excessive short-term trading of emerging-market bonds, which he says hurts the nations issuing the debt and long-term investors like Pimco.

He also has advised some developing nations on their debt sales, which some critics say has skewed deals in his favor.

El-Erian's investment performance with the bonds has attracted billions of dollars to Pimco: The portfolio now totals $28 billion. Almost $3 billion of that is in a retail mutual fund that has gained 19% a year over the last five years, beating 90% of competing funds, according to Bloomberg News data.

At Pimco, El-Erian "has emerged as a savvy investor with a particular knack for identifying opportunities in complex markets, while developing a reputation as a strong and articulate leader," Harvard Management Chairman James Rothenberg, a top executive at Los Angeles-based investment firm Capital Group Cos., said in a statement.

El-Erian said Friday that Harvard first contacted him about three months ago. One aspect of the job that particularly appealed to him, he said, was the "ability to work in an economic environment and mix that with some teaching" at Harvard.

Acknowledging the Harvard fund's stellar performance, he said he wasn't being brought in to fix a troubled portfolio. "I'm going to build on something that works very well," El-Erian said.

Under Meyer, the diversified portfolio of stocks, bonds, real estate and other assets produced an average annual return of 16.1% over the last 10 years, compared with 9.4% for similar institutional investment funds.

Despite that performance, Meyer became a target for critics at Harvard who questioned his pay and that of others on his team of 130 people. Meyer earned about $7 million in fiscal 2004, a high pay level for a manager of a university endowment fund.

Harvard did not disclose El-Erian's pay, but a spokesman said he would receive "a similar package to Meyer's."

El-Erian, the son of an Egyptian diplomat, took an unusual path into money management. He earned a doctorate degree in economics from Oxford University, then spent 15 years at the International Monetary Fund, a financial advisor and lender to developing nations.

He joined Pimco in 1999, when the firm was looking for someone to boost its stake in, and experience with, the high-yielding, often high-risk bonds of emerging-market nations.

Bill Thompson, Pimco's chief executive, said Friday that the firm "hated to lose [him], but we're really happy for him."

El-Erian said he would stay several months to help with the transition at Pimco. The firm on Friday named 32-year-old Michael Gomez, one of El-Erian's team members, to oversee the emerging-market portfolio.

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