Pimco's Chief Economist McCulley Stepping Down -- Update

By Chelsey Dulaney 

Pacific Investment Management Co. said Friday that Paul McCulley, who returned to the firm last May to help soothe nervous investors amid ongoing turbulence, has stepped down from his roles as chief economist and managing director.

Mr. McCulley, who originally left the bond-fund behemoth in 2010 after serving as a senior executive, returned to Pimco at the urging of Bill Gross, a close friend and the firm's co-founder.

Mr. Gross shocked the investing world by leaving the firm at the end of September to start a new mutual fund at Janus Capital Group Inc. Newport Beach, Calif.-based Pimco has since scrambled to keep investors following months of internal strife.

Mr. McCulley's departure from Pimco also follows the investment firm's naming of a new global economic adviser earlier this month. Joachim Fels, who was previously chief economist at Morgan Stanley, will also advise on portfolio strategy.

Mr. McCulley's last day at Pimco will be Feb. 28. Pimco, a unit of German insurer Allianz SE, also lost its chief executive, Mohamed El-Erian, last year after clashes with Mr. Gross.

Mr. McCulley, who has been identified by his long mane of hair, is perhaps best-known for coining the term "shadow banking" during the financial crisis, and the "Minsky moment," a term used to describe a sudden collapse of asset values, which was a phenomenon examined by the economist Hyman Minsky.

When he returned to Pimco, he took on the newly created role of chief economist and served on Pimco's investment committee, traveling the country to meet with big clients. Speaking about Mr. McCulley's rehiring, Mr. Gross said "We thought that Paul would be the unifying force, so to speak," of the firm's new structure.

Mr. McCulley's departure comes as investors continue to pull funds from Pimco.

In January, investors pulled another $11.6 billion from Pimco's flagship Total Return fund as retirement plans withdrew more commitments from the world's largest bond mutual fund.

The new outflows were lower than the $19.4 billion lost in December, according to the company. But January was the 21st consecutive month of withdrawals from the company's flagship fund, according to research firm Morningstar Inc. It is now down 54% from its peak of $293 billion in April 2013.

Write to Chelsey Dulaney at [e-mail]

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