El-Erian Returns to Pimco

After just 2 years at Harvard, Mohamed El-Erian is returning to Pimco as Co-CEO and Co-Chief Investment Officer. His short stint at Harvard was successful, but now the door is open again for a new face to run the $34.7 billion endowment:

Sept. 11 (Bloomberg) -- Mohamed El-Erian unexpectedly resigned as head of Harvard University's $34.9 billion endowment fund to return to Pacific Investment Management Co., manager of the world's largest bond fund, as co-chief executive officer.

The 49-year-old executive, who led Harvard Management Co. to its best results in seven years after taking over in February, 2006, said in a statement that he was returning to Newport Beach, California-based Pimco to be closer to family members.

Harvard recruited El-Erian in October 2005 to fill the void left a month earlier by the departure of 15-year investment chief Jack Meyer, who left along with almost three dozen Harvard officials to start a Boston-based hedge fund. El-Erian rebuilt the staff and guided the endowment to a 23 percent gain in the fiscal year ended June 30, adding $5.7 billion to the world's biggest university endowment.

``Mohamed has done an impressive job guiding and reorganizing Harvard Management Co., and we will miss his leadership,'' said James F. Rothenberg, treasurer of Harvard University and chairman of the fund's board. ``In addition to achieving excellent investment returns, he has led ambitious efforts to rebuild HMC during his time as CEO.''

At Pimco, El-Erian will be co-chief executive officer and co-chief investment officer, starting in January, the Newport Beach, California-based fund said in a statement. El-Erian, a former managing director and senior portfolio manager at Pimco, will share the CEO position with Bill Thompson and the top investment job with company founder Bill Gross.

Emerging Markets

Rothenberg said a search for El-Erian's replacement will begin promptly. Harvard Management, founded in 1974, invests about half of the school's endowment and oversees external managers who handle the remainder.

``Obviously we would prefer that he stay longer, but HMC is in great shape,'' Harvard spokesman John Longbrake said in an e- mail. ``In 18 short months, HMC has completed the transition and rebuilding phase and established conditions for sustaining superior returns over time.''

El-Erian was considered one of the world's most influential emerging-markets managers when he was hired by then-Harvard President Lawrence Summers. He had been a Pimco managing director for six year, overseeing $28 billion in bonds of developing nations and their companies when he left.

IMF Background

Previously, El-Erian spent 15 years at the International Monetary Fund, rising through the ranks to become a 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. El-Erian's name was put forward in 2004 to be the IMF's managing director.

Meyer left Harvard to form Boston-based investment firm Convexity Capital Management LP, taking more than 30 Harvard managers and other employees with him. The departures included almost all of Harvard Management's internal bond investors.

El-Erian said he wouldn't let Harvard become overly reliant on a single team or strategy again. He cut the fund's traditional dependence on bonds, shifting more assets to buyout funds and non-U.S. markets. He also hired senior managers from Stanford University, Deutsche Bank AG and elsewhere.

In the most recent fiscal year, the only full one under El- Erian, the fund had its best performance since 2000, recording its fourth-best increase since the management company's founding in 1974.

``Harvard has been fortunate to have someone as skillful and effective as Mohamed El-Erian responsible for the management of our endowment,'' said Drew Faust, Harvard's president since July 1, in a statement. ``It will be a top institutional priority to do all we can to ensure that HMC continues to deliver superior investment returns with a focus on advancing Harvard's educational mission.'