Skip to Content
Morningstar

Gross Lawsuit Doesn't Change Our PIMCO Ratings

Our view of PIMCO and its flagship Total Return are unchanged, but we'll be watching for any new information on PIMCO's fee practices.

Bill Gross filed a lawsuit against his former employer, PIMCO, on Thursday. The suit alleges that several top executives at PIMCO worked to push him out of the firm in an effort to boost their pay and to expand their firm into riskier asset classes. Gross is seeking at least $200 million in damages for earned compensation that he claims he was denied.

The lawsuit does not currently affect our opinion of PIMCO's funds or how they're run. Our Stewardship Grade for PIMCO is a C, and

There is one element of potential interest to shareholders, however. The lawsuit references how much PIMCO charges in fees and how PIMCO discloses those charges to shareholders, with Bill Gross suggesting that PIMCO has been deliberately obfuscating the allocation of some fees in order to make it easier for the firm to raise them.

The way PIMCO discloses fund fees is an issue that Morningstar analysts have raised publicly many times in the past. You can read our take from 2011 here.

We'll be monitoring the lawsuit for any new material information on PIMCO's fee practices; but again, we see no reason to change our ratings on the firm or the funds at this point.

More in Funds

About the Author

Eric Jacobson

Director
More from Author

Eric Jacobson is director of manager research, U.S. fixed-income strategies, for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. He is a voting member of the Morningstar Medalist Ratings Committee for U.S. and international fixed-income strategies and shares responsibility for determining coverage and research priorities. Jacobson has focused on a variety of taxable, tax-exempt, and nontraditional fixed-income strategies, including several from asset managers such as Pimco, BlackRock, PGIM, and Guggenheim. He has also covered strategies from J.P. Morgan, Fidelity, Goldman Sachs, TCW, Vanguard, Loomis Sayles, Putnam, T. Rowe Price, American Century, Eaton Vance, FPA, and American Funds. He is the team's lead analyst on Pimco.

From 2006 through mid-2008, Jacobson was director of fixed-income strategies for Morningstar Indexes and was responsible for the design and launch of Morningstar's original suite of U.S., global, and emerging-markets bond indexes. Before assuming that role, he was a senior analyst, associate director, and fixed-income editorial director for the fund research team. Before joining the company in 1995 as a closed-end fund analyst, he worked for Kemper Financial Services.

Jacobson holds degrees in political science, Hebrew and Semitic studies, and integrated liberal studies from the University of Wisconsin.

Sponsor Center