El-Erian’s Good Old College Try
Sep 12th, 2007 | Filed under: Hedge Fund Industry TrendsWe don’t usually cover people moves at AllAboutAlpha.com, but this one was just too delicious to avoid. The big news today in the institutional investment world is the resignation of Harvard Management Company (HMC) president and CEO, Mohamed El-Erian after less than two years on the job. El-Erian says he wants to be closer to family in Southern California. The announcement was accompanied by all the usual platitudes about how El-Erian had established life-long friendships at Harvard and how Harvard would have trouble filling El-Erian’s shoes. But those who have followed the Harvard story know there is something deeper going on here.
Alumni virtually revolted in 2004 when El-Erian’s predecessor, Jack Meyer and 5 other HMC managers took home over $100 million in compensation. According to the Boston Globe, Harvard’s Treasurer Ronald Daniel wrote a letter to alumni at the time making the case to spin out HMC into a separate company:
“While the bonus system sometimes produces pay of ‘extraordinary magnitude,’ Daniel wrote, ‘It has allowed us to retain absolutely outstanding portfolio managers in a highly competitive market for talent.’ He also said the endowment board would take action to slow the growth of investment bonuses.”
You can guess how this one turned out. Meyer promptly jumped ship to start Convexity Capital (with some, but not all of HMC’s money).
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