It was also because El-Erian had started allocating money to hedge funds via Mark Taborsky, whom he hired from Stanford University's endowment to head investment with outside managers. Within a year, Taborsky's team revamped Harvard's group of managers, with some of those relationships forged in exchange for longer lockups of capital, El-Erian wrote in his 2008 book "When Markets Collide."
Turnover Continues
In September 2007, El-Erian quit to return to Pimco. The turnover continued as Mendillo moved into the H-shaped Boston Federal Reserve Building, where she decorated her office with family pictures and sidewalk art picked up from her travels in Europe.
Taborsky resigned and went to work for El-Erian, as did Marc Seidner, the head of U.S. bond investing. Karen Parker Feld, who ran the foreign-exchange team, also quit.
Among those who remained at Harvard, Stephen Blyth, who led the international fixed-income team, was disappointed at being passed over for the top job, according to two people familiar with the matter. Blyth, a 43-year-old Briton, previously led the global rates proprietary trading group at Deutsche Bank AG in London.
Blyth had joined the Harvard endowment staff after El-Erian took over. "It was a deep visceral reaction," Blyth says of the prospect of working at Harvard, where he earned his Ph.D. in statistics on a scholarship. "I have a deep connection to Harvard."
'Yale Sucks'
Blyth, who also teaches a statistics class at the school, displays a T-shirt from a 1989 football game in his office. It's emblazoned with "Yale sucks" in red lettering.
Mendillo promoted Blyth to be in charge of all internal investment managers, and he was won over by her cool head amid the crisis. "She very quickly established herself as someone who brought confidence to the whole organization," he says. "She's very calm, very thoughtful."
Blyth was her top-performing manager last year, earning compensation of $6.4 million. That compares with $1 million for Mendillo during the six months she spent at the fund in 2008. Pay packages are far lower than in Meyer's day.
Mendillo, whose bookshelf is dotted with Michael Lewis's Moneyball, Robert Shiller's The New Financial Order and other finance books, now links senior managers' pay to the returns they produce, unlike in the past, when pay was tied to benchmarks.
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