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By Jeremy Glaser and Michael Herbst | 09-26-2014 07:00 PM

Some Clarity Gained, Some Questions Remain for PIMCO Funds

PIMCO’s post-Gross changes suggest the fund strategies, including Total Return, won’t radically change, but several question marks remain.

Jeremy Glaser: For Morningstar, I'm Jeremy Glaser. After this morning's surprise announcement that Bill Gross was leaving for Janus, PIMCO said this evening that Dan Ivascyn will be taking over as group CIO. I'm here today with Michael Herbst--he's our director of manager research for active strategies here in North America--for his take on this news.

Michael, thanks for joining me.

Michael Herbst: My pleasure.

Glaser: With Ivascyn's promotion to group CIO and other deputy CIO's also being promoted, is this news basically in line with what you expected?

Herbst: In combination, these moves definitely make sense. We won't rehash all of the moves here, but each of the CIOs that were named today were, in fact, deputy CIOs or named deputy CIOs in the wake of Mohamed El-Erian's departure. At that point, we knew that these were going to be some of the key folks involved--or potentially involved--in a succession plan for Bill Gross.

The group CIO announcement of Dan Ivascyn--that was one that we didn't know, for sure, how that was going to unfold. But he is very well regarded by us and is very well regarded by his colleagues, too; so that's a comforting announcement as well.

Glaser: Does this give you some more confidence that there will be at least some short-term stability at PIMCO?

Herbst: Yes. I'd say the emphasis is on the short-term stability. An important part of the message right now that a lot of investors in PIMCO funds are thinking about is "What does this mean today? Should I sell my fund or should I continue to hold my fund?" What these changes, in sum, suggest to us is that the strategies that the portfolio managers ply at their individual funds--in their new roles, too--and the way that PIMCO as a firm executes its fixed-income strategies, we aren't likely to see any immediate or radical changes that would have us concerned. That is what I mean by "for now."

The other part of the situation here at the portfolio-manager level, getting a better sense of how the new managers are stepping into their new roles and working with colleagues in a new way perhaps, is something that will take a little bit of time to assess. At the firm level, too, there is some of that going on in terms of what these changes in total, with Bill Gross' departure, mean for the future direction and leadership of PIMCO as a firm.

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