Do managers matter?
That’s what I wondered when I read that Mohamed El-Erian, CEO and co-CIO of the Pacific Investment Management Company—PIMCO—is resigning. PIMCO is the largest bond manager in the world, and one of the most successful asset managers of all time, with almost $2 trillion in assets. Their flagship total return bond mutual fund has over $200 billion.
Some have linked El-Erian’s resignation to the $40 billion in outflows from the bond fund last year, or the difficulty that PIMCO has had in diversifying its business model by providing equity-oriented funds. But that’s just silly. A massively successful manager doesn’t get the boot just because he had a bad year, or a difficult initiative. Under El-Erian, the firm more than tripled its size.
El-Erian has taken time off before. He left PIMCO in 2005 to run Harvard University’s endowment, then returned in 2007. Harvard needed a high-profile manager after compensation disputes gutted its endowment management team. It’s far more likely that Mohamed has another public-service initiative in mind. He’s the son of an Egyptian diplomat who’s fluent in English, French and Arabic. Egypt could certainly use his expertise, and he’s indicated before that he’d like to serve that country in some way.
In any case, PIMCO is unlikely to suffer greatly because of his departure. Founder and co-CIO Bill Gross is still around, with his “batteries 110% charged and ready to go another 40 years” as he tweeted yesterday, and the company has a deep bench of manager talent.
But one thing’s certain: El-Erian’s star isn’t fading.
Douglas R. Tengdin, CFA
Chief Investment Officer