A bit more information on the
El-Erian front this morning, with Pimco’s Bill Gross talking
to the Wall Street Journal. The big news is that Pimco seems to be interested
in getting into the alternative investments:
In his newly created role, Mr. El-Erian will help expand the firm’s product
line and increase the role of alternative investments such as hedge funds,
according to Mr. Gross.
This is a massive development for Pimco, which could quite conceivably become
the largest player in the world in the fund-of-funds space. Funds of hedge funds
have historically suffered from the problem that picking a single fund-of-funds
manager is no easier than picking a single hedge fund manager. But if Mohamed
El-Erian is picking funds, and he’s backed up with all the institutional capabilities
of Pimco, then he almost automatically gets onto the shortlist of any potential
investor.
There’s also some new information on El-Erian’s remuneration:
Pimco declined to specify Mr. El-Erian’s pay package, though Mr. Gross said
it would be on par with the compensation he enjoyed during his initial time
there…
Mr. Gross said that Mr. El-Erian’s experience at Harvard, where he was president
and CEO of Harvard Management, "filled in his resume" in a way that
made the new position at Pimco possible.
I don’t really understand this. El-Erian was first and foremost a fund manager
when he was at Pimco; he had very little in the way of the kind of operational
responsibility that he had as CEO of Harvard Management Corporation. That experience
has now qualified him for the co-CEO job. What’s more, his stellar returns in
the non-fixed-income space have qualified him to lead Pimco’s push into that
market, and have served as a proof-of-concept that bond-fund managers can successfully
invest in other asset classes as well.
In other words, El-Erian is now vastly more valuable to Pimco than he was when
he left, and has a much more important job title. So I’m not entirely convinced
that his pay package won’t have gone up substantially. Maybe it’s just very
back-loaded with a percentage of alternative funds under management if and when
they arrive.
El-Erian didn’t talk to the WSJ, but he did apparently talk to Latin Finance,
which reports in its daily email that he told them he made the move "to
rejoin my personal and professional families." Is that a hint that he felt
more at home at Pimco than he does at Harvard?