(Adds El-Erian declines to comment; background on McCulley's new role)
By Jennifer Ablan
NEW YORK, May 27 (Reuters) - Pimco said on Tuesday it has rehired Paul McCulley, who was previously a portfolio manager and the bond giant's top analyst of the U.S. Federal Reserve's policies, in the latest management change after the departure of the firm's chief executive Mohamed El-Erian earlier this year.
The firm, which oversaw $1.94 trillion at the end of March, said McCulley will be its chief economist, a newly created role, and will report to Bill Gross, co-founder and chief investment officer.
McCulley will assume much of El-Erian's role as Pimco's public face in leading "discussion on global macroeconomic issues and central bank policy, writing and publishing commentary, and speaking with Pimco's clients around the world," the firm said in a statement.
El-Erian, who has repeatedly called McCulley "my good friend", declined to comment for this story. Gross and El-Erian had a very public falling out in the weeks after El-Erian announced his departure from Pimco, whose full name is Pacific Investment Management Co.
Gross spent several months wooing McCulley back to Newport Beach, California-based Pimco, according to four sources close to McCulley.
McCulley had been vying for a second time for a Federal Reserve board seat over the past year and even cut his long hair to help his case but he lost out to others, the sources said. McCulley told Reuters back in 2011 that he has always dreamed of being on the Fed.
He decided to retire from Pimco at the end of 2010 as a senior partner and member of the firm's investment committee shortly after he failed in his first attempt to get President Barack Obama to nominate him for a Federal Reserve governorship.
"I look forward to working side by side with Bill as economic counselor and interacting with the Deputy CIOs," McCulley said in a statement on Tuesday, with reference to Pimco's recent appointment of six new deputy chief investment officers who report to Gross. "I anticipate writing frequent scholarly essays, as well maintaining a robust calendar of speaking engagements. Pimco will always be Camelot to me."
Pimco said McCulley will not manage client portfolios or serve as a portfolio manager.
Gross has not only been dealing with the fallout from the El-Erian departure but also facing concerns about the firm's performance, including that of its flagship Pimco Total Return Fund, which suffered an 12th straight month of outflows in April.
In a statement, Gross said: "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. 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 was named a managing director and will be a member of Pimco's investment committee. McCulley will spend up to 100 days per year working in Pimco offices around the world, and he will also continue to dedicate a portion of his time to activities outside the firm, including leading the Morgan le Fay Dreams Foundation, as well as academic activities, Pimco said.
Over the past three years, McCulley, 57, has been chairman of the Global Society of Fellows at the Global Interdependence Center, a think tank, where he published two papers on monetary and central bank policy.
McCulley first joined Pimco in 1990 as an account manager. He left two years later to become chief economist for the Americas at UBS. He returned to the firm in 1999 as a portfolio manager, and became head of its short-term desk and a member of the investment committee. (Editing by Peter Galloway and Martin Howell)