The Long-Term Legacy of a Short-Term PIMCO Bond Manager
PIMCO loses a skilled maestro of the bully pulpit.
Some managers leave obvious and enduring legacies when they retire from the very public world of mutual fund management. Think Peter Lynch, Jeff Vinik, or Michael Price. PIMCO's Paul McCulley never achieved the same celebrity, but in some ways his career was just as noteworthy as those well-known stock managers'. As one colleague put it, McCulley was often overshadowed by other luminaries at his own firm, such as the Bond King Bill Gross and author and Harvard Endowment refugee Mohammed El-Erian, but McCulley's impact was no less deserving of recognition.
McCulley, whose primary responsibility at PIMCO was managing short-term bonds, may not have been well-known, but he had an extremely broad impact on the firm. During his PIMCO tenure, McCulley ran the firm's short-term desk, and was responsible for a broad swath of assets, including the nearly $12 billion PIMCO Short-Term (PTSHX). He had full, personal responsibility for more than $38.6 billion in assets, but a lot of PIMCO funds and institutional accounts rely heavily on short-term investing; numerous funds in the complex, including PIMCO Total Return (PTTRX), use forward contracts, futures, or other tools that allow big pools of underlying "cashlike" assets to be invested with the goal of adding incremental extra returns. So much of that money was entrusted to the tutelage of McCulley and the short-term desk (including roughly $120 billion in money markets) that he actually had his hands in the management of more than $419 billion.
His record as a manager speaks for itself. He was by no means infallible, nor did he ever hesitate to dissect and explain his mistakes. But unlike other short-term managers who--prior to the financial crisis--took risks they neither grasped nor could control, McCulley resisted the temptation to chase yield and grow assets. Some of those who gave in wound up ruining their careers, punishing shareholders with painful losses, and subjecting their firms to ignominy and litigation.
Eric Jacobson has a position in the following securities mentioned above: PTTRX. Find out about Morningstar’s editorial policies.