Friday, October 14, 2005

El-Erian to run Harvard endowment

I guess I should reevaluate my investment in PIMCO's emerging markets bond fund, made mostly based on El-Erian's reputation :-)

I can't imagine El-Erian will make much less than Meyer did, which will probably continue to irritate certain alumni. See earlier post.

Harvard Hires Pimco's El-Erian to Run $25.9 Billion Endowment
2005-10-14 10:25 (New York)

By Brian K. Sullivan and Matthew Keenan
Oct. 14 (Bloomberg) -- Harvard University is hiring Mohamed El-Erian, who oversees emerging-market debt investments at Pacific Investment Management Co., to run its endowment.

El-Erian, 47, will be chief executive officer and president of Harvard Management Co., which manages the $25.9 billion fund for the Cambridge, Massachusetts, university, replacing Jack Meyer who resigned to start a hedge fund, Harvard said in a statement today.

El-Erian has been a managing director at Newport Beach, California-based Pacific Investment Management, known as Pimco, since 1999. He oversees more than $28 billion, making him the world's biggest buyer of emerging market debt.

Harvard's endowment under Meyer was consistently a top performer. Its investments returned 19.2 percent in the year ended June 30, almost triple those of U.S. stocks and bonds. Even so, Harvard Management has been criticized for paying its
managers too much, a factor in Meyer's decision to leave.

El-Erian's flagship $2.9 billion Emerging Markets Bond Fund has a five-year annualized return of 19 percent, ranking ahead of 90 percent of competitors, according to data compiled by Bloomberg. In the past year, the fund has gained 10 percent, trailing 69 percent of rivals. He also manages Pimco's Floating Income and Dividend Income funds.

El-Erian spent 14 years at the International Monetary Fund, where he rose through the ranks to become deputy director. He left in 1997 and was a managing director at Salomon Smith Barney before joining Pimco, a unit of Munich-based insurer Allianz AG. He earned his undergraduate degree in economics at Cambridge
University and a master's and doctorate at Oxford University.

Endowment Returns

El-Erian spent much of his youth in Egypt and Europe, becoming fluent in Arabic, English and French. His father, Abdallah, was a lawyer and diplomat who represented Egypt at the United Nations in New York and was ambassador to France and

His appointment was reported earlier today by the Boston Globe.

Harvard has been one of a few U.S. universities that relies on in-house managers to invest its endowment fund. Under Meyer, the proportion of money managed by outsiders has increased to 50 percent from 15 percent, with the university parceling out billions to companies formed by departed Harvard Management employees.

Harvard had named Peter Nadosy, former president of Morgan Stanley Asset Management, to fill in for Meyer, 60, until a permanent replacement was hired. Meyer, who said in January he planned to start a hedge fund, will take about 30 Harvard Management employees with him. His firm, Convexity Capital Management LP, will manage about $500 million for the college.

Under Meyer, the endowment had grown from $4.7 billion over 15 years. The fund had a 16.1 percent average annual gain in the 10 years through June, compared with an 11.8 percent increase of the university's internal benchmark.

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