PIMCO Draws On Its Deep Bench

Earlier today, PIMCO made a number of announcements regarding reassignment of Bill Gross' duties. With a number of highly regarded portfolio managers assuming his management duties, PIMCO funds are--for the moment--on stable ground in terms of management expertise and research depth. We've posted the full press release here for those keeping score. By no means are PIMCO or the funds in the clear--Morningstar's manager research team wanted to weigh in with initial thoughts and will circle back with more analysis in coming days.

First, News for Several PIMCO Funds
Mark Kiesel, Scott Mather, and Mihir Worah will be taking the reins of  PIMCO Total Return (PTTRX). Given the trio's depth in global fixed-income, credit, real assets, and multiasset portfolios, the trio is in theory well-suited to steer the fund through what promises to be a challenging stretch ahead. (Kiesel was named Morningstar Fixed-Income Fund Manager of the Year 2012.) That said, assessing how they intend to put their imprint on the fund's strategy and how well they jell day-to-day are the open questions Morningstar is digging into.

Dan Ivascyn of  PIMCO Income (PIMIX) with Saumil Parikh and Mohsen Fahmi will be taking over  PIMCO Unconstrained Bond (PFIUX). Ivascyn was named Morningstar Fixed-Income Fund Manager of the Year 2013 and is well-regarded by colleagues for his work on  PIMCO Income (PIMIX). Parikh and Fahmi are lesser known to many mutual fund investors, but Parikh had worked closely with Gross and Mohamed El-Erian in the past, and Fahmi recently joined the firm from Moore Capital and works alongside Worah on  PIMCO Global Multi-Asset (PGAIX).

These moves result in a number of other manager changes at other funds. At first glance, Morningstar is quite familiar with virtually all of the managers now in the mix. In combination, these announcements suggest there won't be immediate, radical changes to the funds' strategy or to the broader, macroeconomic analysis so critical to PIMCO funds. We will weigh in on the other fund changes and the broader implications for their management and strategies in coming days.

Now for PIMCO the Firm
The announcements included the naming of a number of CIOs to oversee broader areas for PIMCO globally. Structurally, the appointments make sense, as they feature a number of individuals named as deputy CIOs upon El-Erian's early 2014 departure. Parsing the actual changes that these CIO appointments entail for the firm's leadership and direction is the task at hand.

As Morningstar mentioned in an earlier video, these changes will have formal repercussions as the various individuals involved assume different responsibilities. More important, Gross' departure and these latest announcements will undoubtedly have less formal if more powerful repercussions that remain to be seen, in terms of the firm's personnel, performance, and culture, as well as investors' confidence or lack of confidence in the post-Gross PIMCO. Morningstar will be moving quickly to reassign Morningstar Analyst Ratings to all rated PIMCO funds and will also circle back with analysis of the broader situation. Stay tuned.