In Safe Hands

The Harvard Management Company (HMC) has many things on its plate, but finding a first-rate CEO is no longer one of them. Last week, the University announced that it had found a replacement for the position to lead the largest endowment in higher education. And we are impressed by their choice, Mohammed A. El-Erian.

Not only is El-Erian extremely qualified, but he seems to be a fitting person to serve an institution that counts profit as only one among its many missions. His renown and expertise in emerging bond markets will undoubtedly lead to more informed global investments and we are particularly pleased to find that he will be joining the Harvard Business School (HBS) faculty when he arrives this January. All in all, a man who can multiply both money and knowledge is an altogether valuable thing in a university community.

The Oxbridge-educated El-Erian has a resume that boasts a 15-year stint at the International Monetary Fund (IMF) as well as a shorter one at the brokerage of Salomon Smith Barney. Prior to accepting the HMC position, El-Erian was managing a $28 billion emerging market portfolio at the Pacific Investment Managing Company (PIMCO), an endowment slightly larger than Harvard’s $25.9 billion war chest. All of this makes El-Erian supremely qualified. Considering that financial managers can find similar jobs for higher pay and less visibility, the search committee must be congratulated for their excellent choice.

It is also an appropriate one in light of HMC’s recent divestment from Petrochina, a Chinese Petroleum firm with projects in war-ravaged Sudan, where many have accused the government of genocide. Since knowledge of a region’s economy implies familiarity with its political situation as well, El-Erian can be trusted to have a more comprehensive understanding of where and to what end Harvard’s money is being spent. His time at the IMF not only indicates his talent, but also his honorable interests—development and alleviation of poverty. With the emphasis on corporate responsibility in the business world today, El-Erian ensures that the HMC will lead the propagation of ethical standards in the wider business community, not merely waiting for them to fall into place.

Another way El-Erian fits seamlessly into the University is the way the latter has not had to break its wage budget to attract to attract such competence. The wages and compensation packages of HMC managers constantly serve as a lightning rod for criticism, with the most recent coming from some members of the Class of 1969, who claim they are receiving too much. Yet they earn far less than market value. We support the status quo, where Harvard is free to pay managers less than a profit-driven institution would, but enough to attract talent like El-Erian.

As a final benefit, we are pleased to note that El-Erian will be teaching at HBS starting next year. This opportunity to teach capitalizes upon the endowment’s internal management of some of its money, which is not available to some institutions—like Yale—that manage their whole endowments externally. This dessert is a welcome addition to an already satisfying meal.

Anyone replacing Jack R. Meyer, the highly successful former CEO of the HMC, has much to live up to. We are confident that Mr. El-Erian will be able to do this. Welcome to the other Cambridge, Mr. El-Erian. Best of luck.