Some suggest that he found the Harvard bureaucracy too much — although it seems doubtful that this could have been much worse than the IMF, where El-Erian had worked successfully for 15 years before going to Pimco.
A big promotion was offered for El-Erian’s return to Pimco. He left as senior portfolio manager — he was in charge of emerging market bonds — and returns with two top roles — as co-chief executive officer, alongside Bill Thompson, and as co-chief investment officer, sharing the role with Bill Gross.
He is also likely to be paid considerably more than the $2.3m annual salary offered by Harvard.
One suggestion about his move centres on possible changes in the ownership of Pimco, which was founded 36 years ago by Gross and two others. Thompson, 60, joined Pimco in 1993 and was a key figure in taking the group public in the mid-1990s.
That move created a valuation for the group and paved the way for selling it to Allianz, which in 2000 took a 70 per cent stake, and subsequently lifted its holding to 85 per cent.
Since then, Pimco’s assets under management have tripled to $700bn and Bill Gross has become a household name.
One fund manager who invests in European companies said: “There are a number of Allianz shareholders out there who say the break-up value of Allianz is greater than its current market value.”
If Allianz was a willing seller of Pimco, that would open up several possibilities, including an IPO or a management buy-out of the group, he said. Those options would probably be more attractive to the Pimco team than another outside buyer.
“Mohamed might have been brought in to create a strong management team to engineer a realisation of value for Pimco,” another person familiar with Pimco’s history tells Brewster.
Pimco generates revenue of about $1.75bn with estimated profit of $700m, according to industry executives. A portion of the profit goes to senior employees, which would include El-Erian.
Pimco said: “We don’t have any such plan for a spin-off at Pimco but ultimately that would be a decision by Allianz.” Allianz had no comment. And not surprisingly, El-Erian also declined to comment.