Fund Times: Harvard's El-Erian to Rejoin PIMCO
Plus, news on limited Vanguard fund reopenings, First Eagle Gold reopens, more.
Fixed-income giant Pacific Investment Management Company, PIMCO, has scored a coup in rehiring Mohamed El-Erian from Harvard endowment. El-Erian was hired by Harvard in Oct. 2005 and took over as CEO in Feb. 2006, after working at PIMCO for seven years. El-Erian rebuilt the university's endowment investment staff during his brief stint; the team had suffered when former head Jack Meyer left to found hedge fund Convexity Capital Management, taking 33 professionals with him. When he returns to PIMCO, El-Erian will occupy the newly created position of managing director, co-CEO (with Bill Thompson), and co-CIO (with Bill Gross). This is the first hire PIMCO has ever made directly to the managing director level.
El-Erian's return is a clear positive for PIMCO. At the time of his departure, El-Erian managed PIMCO Emerging Markets Bond (PEMDX) and was widely considered one of the leading investment minds at the firm. El-Erian's academic and government experience made him uniquely qualified to lead the emerging markets bond team. His success at Harvard's endowment, where he gained 23% in the year ending June 30, 2007, and reorganized the staff, burnished his reputation.
While there already has been speculation that the move is an attempt by PIMCO to solidify succession plans should Gross decide to retire in the next several years, the firm made clear that there are no plans for Gross or Thompson to step down any time in the near future. "Neither Bill Gross nor I at this time have any plans to step down, and in fact, have just been elected by PIMCO's Managing Directors for 5-year terms in our respective roles," said Thompson in a statement. Rather, PIMCO has said El-Erian's return adds leadership depth and aids the firm in its attempts to further globalize its staff and investment strategies. In addition, PIMCO said his return contributes to the expansion of the firm's alternative investment options, an area in which Harvard gained renown.
Vanguard to Open Funds to High Rollers
In a recent column, Vanguard chairman John Brennan announced that several of the firm's now closed funds will reopen to Flagship level clients, those with $1 million or more invested with the firm. The funds reopening on Sept. 20 are: Vanguard Explorer (VEXPX), Vanguard PRIMECAP (VPMCX), Vanguard Capital Opportunity (VHCOX), Vanguard Health Care (VGHCX), and Vanguard Precious Metals and Mining (VGPMX).
Brennan hopes that these limited fund openings will "generate a modest level of share purchases to offset the redemptions that occur naturally in closed funds. (Because) it is far more tax-efficient and cost-efficient to offset a fund's daily redemptions with incoming cash from purchases rather than by selling securities." Brennan also said that the firm will continue to carefully monitor cash flows into the five funds, and would close the funds again if it felt flows became troublesome.
First Eagle Fund Reopens to Goldbugs
Arnhold and S. Bleichroeder Advisers announced the reopening of First Eagle Gold (SGGDX), effective Oct. 1. The fund closed on May 8, 2006, as then manager Charles de Vaulx thought that many areas of the gold mining industry had become too expensive and mergers had narrowed investment options. We thought this was a prudent decision at the time, but the fund's new manager Jean-Marie Eveillard has a modestly smaller asset base to put to work now, as the fund has seen some outflows lately. This fund has historically been a fairly pure gold play, so with Eveillard's long experience, we think it's a reasonable option for those seeking gold exposure.
Van Kampen Reopens Muni Funds
Van Kampen High-Yield Municipal (ACTHX) and Van Kampen Strategic Municipal Income (VKMHX) recently reopened to new investors. Both funds are run by manager Wayne Godlin, who has skippered High-Yield Municipal since 1990 and took the helm at Strategic Municipal Income in 2002. At both funds, he invests primarily in longer-maturity, nonrated municipal bonds. His buy-and-hold approach has generated impressive long-term results at High-Yield Municipal, and Strategic Municipal Income's showing on his watch has been promising. Both funds have been closed over the past few years: Given Van Kampen's predetermined targets for reclosing the funds, we wouldn't expect either one to remain open for too long.
McMorgan to Reorganize under MainStay Banner
New York Life Investment Management has announced a proposed reorganization of several options in its McMorgan fund lineup. The McMorgan funds will be merged, should shareholders approve, into MainStay funds with similar investment objectives and will retain the same management teams. Additionally, expenses will either remain the same or may drop modestly. Thus, the proposed reorganization shouldn't negatively impact investors of most of the funds; however, the plans do also include two fund liquidations. McMorgan Balanced (MCMBX) and McMorgan High-Yield (MCMHX) will be liquidated. NYLIM has suggested that these changes are an attempt to create a more coherent fund lineup, which makes sense since the McMorgan funds were not well known and have small asset bases.
Lawrence Jones does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.
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