CORRECTION APPENDED

The head of Harvard’s $34.9 billion endowment has resigned after just one and a half years in office, the University announced yesterday.

Mohamed A. El-Erian, president and chief executive officer of Harvard Management Company (HMC), will leave at the end of 2007 to take a job at his former employer, California-based Pacific Investment Management Company (PIMCO).

El-Erian, 49, said in a statement released yesterday that he and his wife were returning to California to “be closer to our family.”

In an e-mail to the HMC staff obtained by The Crimson, El-Erian wrote that they “feel that the right thing to do is to move back closer to [our daughter’s] family in California and, in this way, enable our daughter to have a greater sense of family during her important formative years.”

During fiscal year 2007, the first full year with El-Erian at the helm of HMC, the endowment returned 23 percent, ballooning from $29.2 billion to $34.9 billion.

“My time at Harvard has exposed me to many wonderful and interesting issues and people,” El-Erian said in the statement.
A search for El-Erian’s successor will begin immediately, an HMC press release said.

El-Erian came to Harvard in February 2006 after a protracted search lasting over 10 months.

The prior CEO, Jack R. Meyer, took nearly one third of HMC’s employees with him when he left to start a new hedge fund, Convexity Capital Management. Meyer and other top HMC officials had been criticized for their multi-million-dollar salaries and bonuses.

Under El-Erian, Harvard sought to rebuild its depleted internal investment company instead of outsourcing endowment management to other firms, as other peer institutions—including Yale—have done.

“In deciding on the timing, we have been mindful not only of our family circumstances, but also of the fact that HMC is back at a ‘steady state’ following the completion of our rebuild phase,” El-Erian wrote in the e-mail, citing a retooled management staff and governance structure.

“During HMC’s rebuilding efforts we have also focused on deepening our institutional and organizational roots to ensure that the Company can no longer be significantly disrupted by the departure of any individual or groups of individuals (including the CEO),” El-Erian wrote.

“I believe that these efforts...will serve us well as we embark on the CEO hand-off,” he added.

Benjamin J. Heller ’94, a managing director at the hedge fund HBK Investments who has known El-Erian professionally for a decade, said yesterday that El-Erian’s legacy would be his rebuilding of HMC’s internal management team in the wake of Meyer’s departure.

“Because of his credibility, he was able to get a lot of strong people, and hopefully they’ll stay,” said Heller, who was a Crimson editorial editor.

The HMC Board will meet tomorrow, and El-Erian expects them to discuss the first steps of the transition, according to his e-mail to his colleagues.

Despite strong returns under El-Erian, HMC was not completely immune to this summer’s financial crisis—the endowment lost $350 million in July when Sowood Capital Management, a hedge fund founded by former HMC manager Jeffrey B. Larson, collapsed. But overall, HMC made gains of 0.4 percent that month.

University President Drew G. Faust said in a statement that El-Erian has been “skillful” and “effective” at the post.

“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 and with the knowledge that generations of alumni and friends have contributed generously to the resources we have the privilege to invest,” Faust said in the statement.

Before taking the reins of HMC, El-Erian had been a managing director at PIMCO, where he was widely expected to succeed William S. Thompson, Jr. as CEO. His position upon his return will be co-Chief Executive Officer and co-Chief Information Officer, seemingly solidifying his status as heir-apparent. In a statement released yesterday, both Thompson and PIMCO CIO William H. Gross said they have no plans to step down. [SEE CORRECTION BELOW]

—Staff writer Claire M. Guehenno can be reached at guehenno@fas.harvard.edu.
—Staff writer Laurence H. M. Holland can be reached at lholland@fas.harvard.edu.

CORRECTION: The Sept. 12 news article "HMC Chief Steps Down" gave the wrong name for the executive at Pacific Investment Management Company (PIMCO) that Mohamed A. El-Erian, president and CEO of Harvard Management Company, was expected to succeed if he had not come to Harvard. The executive was Bill Gross, founder of PIMCO and manager of the company's bond fund—not William S. Thompson, the company's CEO.