Pimco's El-Erian to run new Global Advantage Fund

Pacific Investment Management plans to open the first fund managed by Mohamed El-Erian since he rejoined the company after quitting as the head of Harvard University's endowment.

El-Erian will oversee the Pimco Global Advantage Fund, according to documents filed with the U.S. Securities and Exchange Commission.

The fund will invest at least 65 percent of its assets in "fixed-income instruments that are economically tied" to at least three countries, the filing said.

It can invest in securities denominated in foreign currencies and U.S. dollars, as well as derivatives such as options, futures contracts and swap agreements.

During his last stint at Pimco, El-Erian produced a five-year annualized gain of 19 percent while managing its Emerging Markets Fund.

The new Global Advantage fund will allow El-Erian to pursue even higher returns, according to Geoff Bobroff, a consultant to asset managers based in East Greenwich, R.I.

"This fund is going to be far more flexible from a management standpoint than the emerging-market fund was," said Bobroff, who has reviewed the Global Advantage filing. "This will give him the opportunity to show his wares."

El-Erian's former Pimco fund, now managed by Michael Gomez, invests at least 80 percent of its assets in fixed-income securities tied to emerging-market countries.

The SEC filing doesn't list any restrictions on where Global Advantage can invest, stating that it can buy emerging-market securities "without limitation" as well as debt from developed countries such as the U.S.

El-Erian managed the Pimco Emerging Markets Bond Fund until February 2006, when he left to succeed Jack Meyer as the head of Harvard's fund, the world's largest college endowment, with $34.9 billion of assets as of June 30.

He guided the Harvard endowment to a 23 percent gain in the fiscal year ended June 30, 2007, adding some $5.7 billion in value.

He returned to Newport Beach, Calif.-based Pimco in December and now shares the position of co-chief investment officer with Bill Gross and co-chief executive officer with Bill Thompson.

Global Advantage will seek to outperform the Lehman Brothers U.S. Aggregate Index, the benchmark for many bond managers, as well as an internal Pimco index.

The fund will be able to invest in bonds that are rated between 'B' and 'AAA' by Moody's Investors Service, according to the filing.

The new fund's maximum average duration will be eight years, according to the SEC filing. That is the same as at the Emerging Markets fund.