Pimco to turn to an old hand to steady the ship

Bond manager Pimco lost one familiar face this year but is seeing another return.

The Newport-Beach, California-based firm, which manages just under $2 trillion for clients, said Tuesday it has re-hired Paul McCulley, who has held a variety of positions for Pimco but now will serve as managing director and chief economist.

McCulley's hiring comes just months after CEO Mohamed El-Erian left amid reports of discord with Pimco founder Bill Gross. El-Erian is now chief economic adviser for Allianz, Pimco's parent company.

Indeed, McCulley comes to Pimco during a difficult time for the firm.

Read MoreAllianz CFO plays down hefty Pimco outflows

Its flagship Total Return Fund—the world's largest bond mutual fund with $230 billion under management—has suffered some $55 billion in outflows over the past year, according to Morningstar. The fund has gained 1.92 percent year to date, which is underperforming the Barclays U.S. Aggregate Bond index, up 2.7 percent thus far.

Paul McCulley
Andrew Harrer | Bloomberg | Getty Images
Paul McCulley

Headlines around the time of El-Erian's departure that painted Gross as an autocratic manager intolerant of others' views didn't help the firm's image.

Read MoreTell-all on Pimco was 'overblown,' Gross says

Among other things, McCulley is known for coining the term "shadow banking system" for the network of nonbank lenders whose easy-money practices helped generate the financial crisis of 2008 and 2009.

He left Pimco in late 2010 to work on scholarly projects and to support his personal charitable foundation, Morgan le Fay Dreams, which focuses on helping young adults and on education. His appearance after he departed changed dramatically, from the clean-cut look he sported at Pimco to long hair, sometimes worn in a ponytail, and beard.

"Paul is an experienced and respected thought leader on macroeconomic issues and central banks and he will be an important contributor to our investment process," Gross said in a statement. "During his previous years at Pimco, he played an instrumental role in anticipating and understanding economic dynamics that led to the global financial crisis."

McCulley's hiring appears consistent with Gross' efforts to open up the decision-making procedure at Pimco. McCulley will be responsible for chairing investment committee meetings several times a month and "to lead discussion on global macroeconomic issues and central bank policy."

Read MoreGross on Pimco: Better 'than we were before'

Yet he emphasized that he also will continue his various pursuits in which he engaged during his time off.

"I look forward to working side by side with Bill as economic counselor and interacting with the deputy (chief investment officers)," McCulley said in a statement. "I anticipate writing frequent scholarly essays, as well maintaining a robust calendar of speaking engagements. Pimco will always be Camelot to me."