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Departure of PIMCO Chief Economist Is No Surprise

Morningstar is not making any changes to its ratings on the PIMCO lineup of mutual funds as a result of the departure.

On Friday, Feb. 20, PIMCO announced that its chief economist, Paul McCulley, will be leaving the firm at the end of February. McCulley had returned to PIMCO in May 2014; he'd previously spent more than a decade at the firm before departing in 2010. In his role as chief economist, McCulley was not named as a portfolio manager on any funds, but he did sit on PIMCO's influential investment committee.

While Morningstar continues to keep a close eye on manager turnover at PIMCO, McCulley's departure does not come as a surprise and does not appear to be an indication of flagging morale at the firm. Indeed, senior PIMCO leadership had indicated in recent months that his future at the firm was uncertain given that McCulley had reportedly returned at the personal request of then-CIO Bill Gross.

The other issue posed by McCulley's departure is its impact on the effectiveness of the firm's investment committee. Indeed, together with former co-CIO Mohamed El-Erian and Gross, McCulley was considered one of the firm's top macroeconomic thinkers. However, though it will take some time for the investment committee to prove itself, there are some reasons for optimism. For starters, the 2014 expansion of the investment committee to include then-deputy CIOs Mark Kiesel, Dan Ivascyn, Andrew Balls, and Mihir Worah promised to better integrate the perspectives of portfolio managers plugged into the firm's bottom-up fundamental research. Meanwhile, PIMCO has been on an active hiring campaign. Several recent hires, including Joachim Fels as global economic advisor and former presidential economic adviser Gene Sperling as a consultant, together with the return of Nobel laureate Michael Spence, also as a consultant, add macroeconomic heft. Finally, the returns of veteran manager Chris Dialynas and Marc Seidner, CIO for nontraditional strategies, to the firm and the investment committee are also positive signs.

Morningstar has not made any changes to its ratings on the PIMCO lineup of mutual funds as a result of McCulley's departure. In particular,

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Sarah Bush

Director of Investor Relations
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Sarah Bush is director of manager research for fixed-income strategies, North America. She oversees Morningstar’s fixed-income manager research team and follows a variety of taxable, high-yield, and bank-loan strategies from asset managers including DoubleLine, Fidelity, Loomis Sayles, and PIMCO. Bush is the lead analyst on the DoubleLine and Loomis Sayles fund families and Fidelity’s fixed-income offerings.

Before rejoining the firm in 2011, Bush served from 2006 to 2010 as director of development and then director of investor programs for IFF, a Community Development Financial Institution that provides loans and real estate consulting to nonprofits serving low-income communities in the Midwest. Previously, she spent four years at Prudential Capital Group, an investment arm of Prudential Financial, where she researched, recommended, and negotiated private placement debt investments. Bush originally joined Morningstar in 1997 as a mutual fund analyst.

Bush holds a bachelor’s degree in history and mathematics from the University of Wisconsin, where she graduated as a member of Phi Beta Kappa, and a master’s degree in business administration, with concentrations in finance, economics, and international business, from the University of Chicago Booth School of Business.

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