x Abu Dhabi, UAEWednesday 24 January 2018

Pimco fund manager Mohamed El Erian steps down

Mohamed El Erian has resigned his position as the leader of one of the largest investment companies in the world.

The Egyptian fund manager Mohamed El Erian has stepped down as the chief executive and co-chief financial officer of Pimco, one of the world’s largest fixed-income investment companies.

Neither Mr El Erian, Pimco nor Allianz Insurance, which owns the investment firm, provided a reason for the resignation.

Bill Gross, Pimco’s co-founder, who is 69, was quoted in a 2010 interview with Bloomberg as saying that Mr El Erian, who is 55, would likely take over the direction of the company when he retired.

“What happens longer term is an open question. I have no plans as of now,” said Mr El Erian.

Yesterday Mr Gross tweeted, from Pimco’s account: “Pimco’s fully engaged. Batteries 110 per cent charged. I’m ready to go for another 40 years.”

The company’s flagship fund, the Pimco Total Return Fund, recorded a loss of 1.9 per cent in 2013 – its worst performance since 1994.

Investors retreated from the fund over the course of the year. In October, it was overtaken as the world’s largest mutual fund by Vanguard’s Total Stock Market Index Fund. Net outflows from the fund totalled US$41 billion last year as investors reduced their exposure to bonds.

That month, the company hired Virginie Maisonneuve as head of equities, part of an effort to diversify the company away from its focus on bond markets.

Fixed-income investors took a hit following the Federal Reserve’s announcement that it would begin tapering at the end of last year.

Some commentators have described the global movement from bond markets into equities as “The Great Rotation” as an era of low interest rates and quantitative easing comes to a close.

The S&P index of 500 stocks gained 29.6 per cent last year, while the Barclays Aggregate, a measure of returns on United States bonds, returned minus 2.02 per cent – a clear indication of the divergence between equity and bond performance.

That is also bad news for any fund that generates more than 65 per cent of its return from fixed-income markets, as Pimco’s Total Return Fund does.

Egyptian by nationality but born in New York, Mr El Erian read economics at Queen’s College, Cambridge, before completing a master’s degree and doctorate at St Anthony’s College in Oxford.

He then joined the IMF, where he worked as a staff economist before becoming a deputy director of the organisation.

Mr El Erian moved to Pimco in 1999, where he worked until 2005. He spent two years managing Harvard University’s endowment, which attracted some controversy under his tenure for the size of its payments to staff, but recorded a 23 per cent gain in his first year in charge of the fund.

He is a prolific commentator and writes regularly for a number of newspapers and magazines, and is the author of When Markets Collide, an investment guide published in 2008.

The New York Times reported in 2012 that Mr El Erian earned $100 million that year.

Mr Gross said: “Mohamed has been a great leader, business builder and thought leader for Pimco and our clients. Together we have guided the firm and served our clients during a period of significant change in the global economy and financial markets.”

He will remain in post until March, at which point Douglas Hodge, the company’s chief operating officer, will take over. Mr El Erian will also continue to hold an advisory role at Allianz Insurance.

With presidential elections due to be held this year in his native Egypt, some commentators have suggested that Mr El Erian may look to politics for his next role.


* With agencies