Sept. 5 (Bloomberg) -- Pacific Investment Management Co., the world's biggest bond-fund manager, said Mohamed El-Erian will take over as sole chief executive officer after his counterpart Bill Thompson retires at the end of the year.

El-Erian, 50, will continue to serve as co-chief investment officer with managing director Bill Gross, the Newport Beach, California-based company said in a statement yesterday. An emerging-markets bond specialist, El-Erian returned to Pimco as co-CEO and co-investment head in January after leaving two years before to run Harvard University's $35 billion endowment.

His appointment as sole CEO ``further emphasizes the importance of the investment side of the organization,'' Geoff Bobroff, a mutual-fund consultant in East Greenwich, Rhode Island, said in an interview. ``It may also suggest the firm will have an even stronger global focus.''

Founded in 1971, Pimco oversees about $840 billion in assets, including $226 billion in mostly fixed-income mutual funds as of July 31, according to Financial Research Corp. in Boston. Pimco increased its investments in emerging markets in the year ending June 30 by 13 percent.

In a book he published this year, El-Erian said the world is in the midst of an economic realignment, with wealth shifting to oil-exporting nations and emerging economies such as India and China from the U.S.

`Collision of Markets'

``This bumpy process is nothing less than a collision of markets, in which the markets of yesterday collide with those of tomorrow,'' El-Erian wrote in ``When Markets Collide: Investment Strategies for the Age of Global Economic Change.'' ``For those seeking to understand global economic and financial developments, it will no longer be sufficient to get the United States, Europe and Japan right.''

The son of an Egyptian diplomat, El-Erian is fluent in Arabic, English and French. He studied in the U.K., receiving a bachelor's and master's degree in economics from Cambridge University and a second master's and doctorate from Oxford University.

He spent 14 years at the Washington-based International Monetary Fund, rising to deputy director. He joined Salomon Smith Barney as a managing director in London in 1997 before joining Pimco two years later.

Harvard, in Cambridge, Massachusetts, has the world's largest university endowment. The Ivy League school recruited El-Erian to fill the void created in September 2005 when 15-year investment chief Jack Meyer left to start Boston-based Convexity Capital Management LP. El-Erian joined Harvard in February 2006.

In the fiscal year ended June 2007, he guided the endowment to its best return in seven years, a 23 percent gain that added $5.7 billion in value. El-Erian was with Harvard for the first half of the fiscal year that ended this past June, when the fund gained between 7 percent and 9 percent.

New Fund

Before El-Erian left Pimco, his Emerging Markets Bond Fund posted a 19 percent annualized return in the five years through October 2005, beating more than 90 percent of competitors, according to data compiled by Bloomberg. In April, Pimco filed documents with the U.S. Securities and Exchange Commission saying El-Erian would manage a new fund, Pimco Global Advantage.

Thompson, 63, who has been with Pimco 15 years, oversaw the company as it grew from one office with 125 employees to 1,000 employees around the world, the company said. Assets grew to their present level from $40 billion under Thompson. He plans to sit on corporate boards and pursue philanthropy.

Munich-based insurer Allianz SE, Europe's biggest insurer, bought 70 percent of Pimco for $3.3 billion in May 2000.

The $132.3 billion Pimco Total Return Fund, managed by Gross, is the world's largest bond fund.

To contact the reporters on this story: Joseph Galante in San Francisco at jgalante3@bloomberg.net; Sree Vidya Bhaktavatsalam in Boston at sbhaktavatsa@bloomberg.net.

Last Updated: September 5, 2008 10:32 EDT