El-Erian to Head Pimco Push into Alternative Investments

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?

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