I don’t believe Mohamed El-Erian, born an American in Brooklyn but of Egyptian heritage, is quitting as CEO of Pimco without a pivotol political or economic role awaiting him in Cairo under General Sisi. El-Erian, who left the California fund manager once before to invest for the Harvard Endowment, is in his 50s. At Pimco he led the move into equities at what historically has been a bond house owned by Germany’s Allianz (insurance.). There is still need for that switch.
El-Erian admitted to me that despite spending his winter holiday in Egypt with relatives a matter of weeks before the Arab Spring uprising hit Cairo, he had not an inkling that trouble was brewing.
While a Muslim, Mr. El-Erian was not associated with any of the Islamist and Muslim Brotherhood movements. He has â€clean handsâ€, untainted by corrupt dealings or even presence during the Mubarak years.
Go Mo go!
Yesterday Barry Olliff of City of London, a fund invested in closed-end funds, mostly of the emerging markets persuasion, produced a tirade against US lawyers, part of his 15-year campaign to clean up the CEF market.
Like a knight in shining armor, Olliff wants to clean up abuses to help institutions (like his), retail investors, Britons, Americans, and others. “Fundsâ€, he proclaims, “exist for shareholders!â€
Shareholders are ill-served by closed-end funds rife with vested interests, unaccountability, lack of independence, and excessive legalism rather than a focus on performance. There is a prevailing conflict of interest as a result, between fund boards and management, and the poor fund shareowners.
The symptoms of the problem include oversupply of copycat funds, and funds’ failing consistently to seriously address the stock prices being at persistent discounts from net asset value. They track well only until the ballyhoo of the initial offering has ended.
Defender of widows and orphans, Barry charged that most US buyback programs are a matter of “smoke and mirrorsâ€mainly because the real numbers are not revealed on a timely basis during the buyback period. He noted that many buyback offers were crafted to be uneconomic for either those accepting or rejecting the exit offer, while favoring the advisors and the boards. He also had a few sour remarks about “mark to market†accounting which penalizes US shareholders buying CEFs at the end of the reporting year, hit with an immediate loss.
Actually the latter is a result of the US tax code and the 1940 Act which requires profits at funds to be distributed annually. And some of his zeal for visible buyback programs would require getting rid of the intermediaries who run these to make sure all shareholders are treated equally (pro-rating oversubscribed tenders for example.)
