PIMCO's Jerome Schneider Talks Fed, US Economy

Summary

Bloomberg Talks: PIMCO’s Jerome Schneider Talks Fed, US Economy

Episode Date: August 11, 2026
Main Guests: Jerome Schneider (Head of Short Term Portfolio Management, PIMCO)
Host: Bloomberg

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Episode Overview

This episode dives into the complex world of short-term investing and the broader U.S. economic outlook with Jerome Schneider, the head of short-term portfolio management at PIMCO. The conversation explores how PIMCO achieves consistently strong portfolio performance, their approach to risk and liquidity, and how current Federal Reserve policy under Chairman Kevin Warsh is impacting markets and investor strategies.

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Key Discussion Points & Insights

PIMCO’s Outperformance in Short-Term Paper

• Performance Breakdown:
  • PIMCO’s short-term funds are in the 97th percentile in the one-year window, 91st in three-year, and 89th over five years, drawing a playful sports analogy to the Red Sox and Dodgers.

    “So you’re one week, one year, you’re in the 97th percentile... and then a three year, you’re in the 91st percentile...In the five year...you’re in the 89% percentile.” — Jerome Schneider [00:38]

• Methodology:
  • Success does not hinge on predicting Fed moves but on understanding liquidity in the marketplace — across assets from equities to private debt, with special attention to cash.

    “It’s more about understanding the liquidity framework in the broader marketplace.” — PIMCO Representative [01:22]

  • Liquidity and cash are related but not the same:

    “And understanding how cash and liquidity go hand in hand, they’re not the same thing.” — PIMCO Representative [01:46]

  • Active research into how capital markets and funding structures change is key to finding structural opportunities in the market.

Strategic Approach to Short-Term and Money Market Investing

• Active Management Philosophy:
  • Short-term investing at PIMCO has evolved from bank deposits to money markets to highly active, diversified portfolios (zero to five years) with a focus on preservation, liquidity, and returns above money market yields.

    “At PIMCO we chose to believe in active money management ... when the short term fund came around. For us, when we think about short term, it’s really active management.” — PIMCO Representative [02:50]

• On Using Leverage:
  • PIMCO avoids excessive leverage popular in some funds, focusing on transparency and conservatism.

    “Active management doesn’t necessarily mean you’re owning a T bill all the time, but what it does mean is you have the resources to underwrite risks and balance that conservative approach.” — PIMCO Representative [03:28]

Navigating Inflation and Rate Hikes

• Rate Environment Insights:
  • One-year T-bills may yield 4%, but real (inflation-adjusted) returns can be negative depending on inflation trajectory.

    “Just because you’re getting that 4% handle doesn’t necessarily mean you’re being compensated for the real inflation adjusted returns over that point in time.” — PIMCO Representative [04:21]

  • PIMCO foresees inflation moderating, but recommends looking for active management nominal returns closer to 5%.
• Flexible Monetary Policy & Market Outlook:
  • Monetary policy is increasingly data-driven and flexible.

    “Let’s not bet on what’s going to happen in September, October, December next year. Understand that the framework we’re moving toward...is going back to the golden age of monetary policy, one with flexibility.” — PIMCO Representative [05:23]

  • The blending of lessons from the past and ongoing structural awareness is called a “platinum age” of monetary policy.

Current Fed Leadership under Kevin Warsh

• Market Perception:
  • The markets are adjusting to Fed Chair Warsh’s less-is-more approach and structural changes within the Fed.

    “The markets are having a little bit of trouble to try to understand that less is more and, but he’s fine being in that, in that paradigm.” — PIMCO Representative [07:10]

• Fed’s Decision-making:
  • There’s appetite for practical leadership combining academia and real-world experience, following on from the Powell regime.

    “What we’re finding is that there’s very practical people around the FOMC table...they’re going to raise their concerns very proactively in that regard.” — PIMCO Representative [07:51]

Miscellaneous: California’s Business Climate

• On California’s Economy & Exodus Narratives:
  • Despite frequent talk about a business exodus, California’s size, diversity, and economic gravity keep it stable; real dialogue and compromise tend to prevail.

    “California is a giant state with a giant economy…you find that no place is perfect, but you also find people who have legitimate discussions...ultimately gets to a destination which is more moderate than you probably hear at the outset right now.” — PIMCO Representative [08:43]

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Notable Quotes & Memorable Moments

• Jerome Schneider’s Sports Analogy:

  “In the five year you slum, it’s like the Dodgers losing eight in a row or whatever, you’re in the 89% percentile. You got to be kidding me.” [00:50]

• On the Importance of Active Management:

  “We want to be very truthful about what it is we’re doing. Active management doesn’t necessarily mean you’re owning a T bill all the time...” [03:28]

• On the Era of High Returns:

  “It is humbling to be in that era of high returns, but at the same time it’s repeatable with proper research and proper understanding of how liquidity moves through the marketplace.” [02:32]

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Key Timestamps

• 00:38 — Jerome Schneider discusses PIMCO’s performance in various percentiles compared to other short-term fund managers.
• 01:14–02:46 — Methodology: How PIMCO outperforms, focus on liquidity rather than rate calls.
• 02:50–03:23 — Active management definition, portfolio evolution, and diversification.
• 04:13–05:08 — Discussion of nominal vs. real returns, inflation protection, and T-bill yield context.
• 05:23–06:56 — Broader monetary policy approach and “platinum age” thinking.
• 07:10–08:26 — Reactions to Federal Reserve leadership and policy communication under Kevin Warsh.
• 08:38–09:15 — Insights on California’s business climate and economic resilience.

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Tone and Language

The conversation is dense with industry jargon and analogies (sports, inside baseball), yet remains accessible for experienced investors and finance enthusiasts. Guest and host banter lightly, bringing a degree of humor and humility to the subject of high finance. The message: true outperformance and risk management come from active, research-driven strategy, agile adaptation to market structure, and deep understanding of liquidity—not from chasing fads or making big, high-risk bets.

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For listeners seeking to understand how elite managers at PIMCO think about risk, liquidity, and macro policy in today’s evolving environment, this episode offers rich, practical insights.

Transcript

[Host]

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[Optum Narrator]

Foreign.

[Jerome Schneider]

So you're one week, one year, you're in the 97th percentile. You know, that's like, you know the way the Red Sox have been playing ball. Yep. And then a three year, you're in the 91st percentile.

[Host]

Pretty good.

[Jerome Schneider]

In the five year you slum, it's like the Dodgers losing eight in a row or whatever, you're in the 89% percentile. You got to be kidding me. In short term paper darkening the door. Jerome Schneider, Pacific Investment Management Co. Okay, cut to the chase. What's the methodology and process to deliver that shockingly rare outperformance?

[Pimco Representative]

Good morning, Tom. It's great to be here. You know, it has to do with less of making calls on the Federal Reserve. Hardly what you might.

[Jerome Schneider]

Thank you, thank you, thank you.

[Pimco Representative]

And it's more about understanding the liquidity framework in the broader marketplace. And that's ultimately what it is, is encouraging clients, encouraging those in the marketplace to really understand what liquidity means to them. In the broader investing paradigm. It could go with equities, could go with infrastructure. It goes with private equity, private debt, and most importantly, goes with cash. And understanding how cash and liquidity go hand in hand, they're not the same thing.

[Jerome Schneider]

In 28 flavors of cash. Wicked sophisticated folks. Is it picking up dimes in front of the cash bulldozer? No. More strategic.

[Pimco Representative]

It's more strategic because you have to look at the big picture. Structural changes, regulatory changes, how capital markets are functionally changing. I've been doing this 31, 32 years, Tom, and I would tell you that things have changed pretty dramatically over that time in terms of how things are funded, how sophisticated structured products can be. Obviously, we know the tail risks many times over. And the reality is, is that we're seeing it in real time, calibrate. Those adjustments can't be overlooked. And that's where the structural opportunity to be in that performance helps to corroborate high returns for those looking to outperform basic cash performances and T bills, etc. So it is humbling to be in those in that era of high returns, but at the same time it's repeatable with proper research and proper understanding of how liquidity moves through the marketplace, not just domestically but globally.

[Host]

All right, Pimco, your head of short term portfolio management, what short term for you?

[Pimco Representative]

Short term for us has, has evolved over time. Admittedly traditional short term management mean used to mean bank deposits, then it evolved to money market funds. At Pimco we chose to believe in active money management and that really was launched by, by our predecessors, Bill Gross, etc. Back in 1987 when the short term fund came around. That for us, when we think about short term, it's really active management. Zero to five years focused on capital preservation, liquidity management and ultimately returns which can be above a money market fund type of yield. How do we do that? You create balance and diversification in the marketplace.

[Jerome Schneider]

How do you respond to funds that try to goose with leverage like the triple leveraged cash?

[Pimco Representative]

Well, I think, I think that's actually a really important, really important construct as leverage is one aspect treating things as golden assets. Triple A assets, when there's obviously different mechanics in it are also in that we look at AAA silos, great products, but they're not necessarily a money market surrogate. Yet we see them branded oftentimes as a money market equivalent. So we want to be very truthful about what it is we're doing. Active management doesn't necessarily mean you're owning a T bill all the time, but what it does mean is you have the resources to underwrite risks and balance that conservative approach.

[Jerome Schneider]

I can't say enough folks, how you're getting a view here. The massive inside baseball of short term paper.

[Host]

Jerome Schneider Kimco with Paul Sween BT Mm Go. That is the treasury and money market screen on the blue.

[Pimco Representative]

It's our bible.

[Host]

Yeah, I mean I'm looking at this, I never look at this one year T bill, I can get 4%.

[Pimco Representative]

Yeah, but you have to understand there's, it's been pretty volatile because of the expectation for rate hikes. The one thing to keep in mind though in this whole construct is the measure of inflation. Now we have big numbers coming up as you all have stated throughout the morning, tomorrow and Thursday. But the reality is for an investor in the money market space over time it wavers from positive real returns, positive inflation adjusted returns to negative inflation adjusted returns. And just because you're getting that 4% handle doesn't necessarily mean you're being compensated for the real inflation adjusted returns over that point in time. Now Pimco, we think that inflation is going to come down, but at the same time, if you believe that inflation is going to go remain static or maybe move even a little higher over that point in time. Depending upon what your outlook is, it may not necessarily be the right protection. So you need to have a little bit more nominal return here, closer to 5% that you can have an active management landscape.

[Jerome Schneider]

Many of our guests look at the worship an opportunity, whether it's 30 or tenure or whatever, in the Jerome Schneider short term space. Is there a Kevin Warsh opportunity? Is he clarifies his path.

[Pimco Representative]

Well, not just the Jerome Schneider space, but the fixed income space in general. First of all, you have to approach this with an active open mindset. That means as you approach, understand that the landscape is undulating, it's changing and you have to have the tools and willingness and framework to change along with it. What's important about this is, I think, you know, from a monetary policy perspective, let's not bet on what's going to happen in September, October, December next year. Understand that the framework which we are moving toward in the monetary policy sense is going back to the golden age of monetary policy, one with flexibility, one where we have basically the idea of, of understanding the data in real time and having the ability to react to it. But now we're also moving that, coming with our lessons of the past 20 years, having the platinum age of monetary policy overlay, which is understanding that there's liquidity issues, structural issues that, that central bankers have to be attuned to put those two together. While there might be some opaqueness in communication, it actually is quite constructive in terms of how markets should react in the media term and actually lower volatility, not increase volatility. Now markets don't necessarily see that at this point in time we're seeing markets react in a data dependent world. But from our perspective, this higher income that we're seeing is yes on one hand, the very front end of the yield curve. Five years and in produces positive returns, positive nominal returns and real returns, but also helps to inoculate you to uncertainties that might be geopolitically driven, inflation driven, or maybe just how things are going to turn out in the technology sector going forward. So you're getting equity like returns and fixed income without necessarily having equity volatility along the way.

[Host]

People actually want to talk to you now. Cocktail parties.

[Pimco Representative]

It's great. You know, I had to go, I had to go get a new suit and a new tie, you know, just to have these conversations at this point in time.

[Host]

So do you like the way Chairman Marsh Wash is taking this Fed here with Maybe some of the changes he's considering.

[Pimco Representative]

Listen, the markets are having a little bit of trouble to try to understand that less is more and, but he's fine being in that, in that paradigm. I think it's going to take a little bit time to understand what he's trying to do with the committees and the task forces. Ultimately, it's a justification of a framework probably that allows a little bit more flexibility in real time. But in the meantime, the discussion around the Fed is wholesome and legitimate, and you can have people like Beth Hammock, Larry Logan who are adding to those conversations that are making it very authentic.

[Jerome Schneider]

I would say there's a center tendency here that a lot of people want is lesser knowledge forward, but the process here is important. Alan Greenspan had Donald Cohn. Does he need a strong monetary vice chairman?

[Pimco Representative]

Well, I think, yeah, I think there's, there is probably, maybe a slight argument for that. But at the same time, you know, one thing Jerome Powell told us is that you have to have a more balanced approach in terms of, you know, balancing academia with a world of practical practicality. And so I think that that, that is probably a continuation of what's going on from the power regime to the war regime is, is a, an appreciation for academics, but not necessarily that's the only world you live in at this point in time. So I think what we're finding is that there's very practical people around the FOMC table in the Eccles Building, and they're going to raise their concerns very proactively in that regard.

[Jerome Schneider]

I got to run here, but Schneider, can you just give us a window into the tension in California as they go after the fancy people? Is everybody going to leave, pack up and leave California?

[Pimco Representative]

You know, California is a giant state with a giant economy, and with that

[Jerome Schneider]

in mind, the six biggest in the world.

[Pimco Representative]

Exactly. And so there's a lot of different things that not every packs up and leaves and moves to, you know, beachfront, beachfront property in Arizona, so to speak, tomorrow. But the reality is, is that there are conflict, conflicting interests that will get worked out over time. And that might sound like a sort of a sandbag answer, but I've been there for 18 years after being here in lovely New York for many years as well as around the world. And you find that no place is perfect, but you also find people who have legitimate discussions in terms of how to be constructive about it ultimately gets to a destination which is more moderate than you probably hear at the outset right now.

[Jerome Schneider]

Jerome said, I think so much with Pimco here had a short term portfolio management with a really, really sterling track record.

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