Skip to Content
Fund Spy: Morningstar Medalist Edition

Weighing In on PIMCO Funds

Several changes and key things to watch going forward.

Mentioned: , , , , , , , , ,

Morningstar has reassessed its view on PIMCO and PIMCO funds in light of several events surrounding Mohamed El-Erian's recent departure from the firm. On March 18, 2014, Morningstar lowered its Stewardship Grade on PIMCO to C from B. We also lowered the Parent pillar score of our Morningstar Analyst Rating for Funds on PIMCO funds to Neutral from Positive. PIMCO's overall personnel changes contributed to that change. But so did several other factors, including lower portfolio manager investment alongside fund shareholders, relatively high fees on many of PIMCO funds' noninstitutional share classes, and fund boards that could do more to stand up for PIMCO fund shareholders.

That chain of events triggered a reassessment of Morningstar Analyst Ratings on the firm's funds, as would any material firm-level change at the asset managers we cover. A downgrade in a firm's Parent pillar or Stewardship Grade does not mechanically or automatically force a downgrade in its funds' Analyst Ratings. That's because the Parent pillar is one of five contributing to a fund's Analyst Rating, alongside People, Process, Performance, and Price. In PIMCO's case, several portfolio manager departures and changes and a greater degree of uncertainty around its multiasset and equity strategies fueled several Analyst Ratings changes. We reaffirmed a number of Analyst Ratings as well, generally in cases where those funds' management teams were less affected by the ripple effects of El-Erian's departure.

Michael Herbst has a position in the following securities mentioned above: PTTRX. Find out about Morningstar’s editorial policies.