Two of the most generously compensated money managers in the world labor just down the road from Los Angeles, at Newport Beach bond colossus PIMCO, which oversees a staggering $1.8 trillion in assets. Co-Chief Investment Officers Bill Gross and Mohamed El-Erian make, respectively, $200 million and $100 million a year.
At least according to Geraldine Fabrikant's recent profile of (mostly) El-Erian in the New York Times. As Felix Salmon notes in a post that has now provoked some debate, Reuters reported last year that Gross and El-Erian were only making $33 million each. Then, as now (Felix checked), PIMCO disputes these figures. But Felix doesn't think they're totally out of whack, at least where Gross is concerned:
Certainly that kind of payday is within the realms of possibility, given that his firm manages $1.8 trillion, and his Total Return Fund has $263 billion under management: $200 million is just 0.01% of the former, or 0.08% of the latter. On the long-only buy side, the way you get paid for performance is that your performance attracts new money, and the new money pays management fees. And so long as Pimco’s assets under management are going up rather than down, I can see how Gross’s pay might do likewise. But still.
El-Erian, who at 53 to Gross' 68 is seen as the person who has the best shot at running PIMCO solo in the future, is a fixture on the Washington-Davos-financial TV circuit and a legendarily cerebral hard-charger. The compensation question has attracted much attention as a result of Fabrikant's article, but what really striking is how El-Erian's dawn-patrol work ethic has spoiled Gross' afternoons on the golf practice ranges and links of Southern California:
On most mornings, Bill Gross wakes early at his beachfront home in Laguna Beach, south of here, and is on Pimco’s trading desk by 6 a.m. He says he is working harder than ever and has no plans to retire anytime soon. Mr. El-Erian, he says, has energized Pimco — and him.
Mr. Gross once used to work in a little golf in the afternoons and then return to his office. Not anymore....
“To some extent, I wish that I could go over and hit golf balls like I used to at 3:30, but I have not hit balls in three and a half years,” Mr. Gross says. “Mohamed did not tell menot to hit balls, but his behavior basically said that this is a different company moving at a faster pace.”
Yikes! $200 million a year — or, whatever, only $33 million — and no golf. Given that, it's not hard to understand why PIMCO has $1.8 trillion to look after.