Tags: Morningstar | Pimco Total Return Fund | Gold Rating | Bill Gross

Morningstar Strips Pimco Total Return Fund of Its Gold Rating

Tuesday, 30 Sep 2014 07:31 AM

Morningstar downgraded its analyst rating on the Pimco Total Return Fund to "bronze" from "gold," citing uncertainty about outflows and the reshuffling of management responsibilities after the exit of co-founder Bill Gross.

Gross, the bond market's most renowned investor, quit Pimco for distant rival Janus Capital Group Inc. on Friday, a day before he was expected to be fired from the huge investment firm he helped found more than 40 years ago.

Dan Ivascyn, one of Pimco's deputy chief investment officers, was named Group Chief Investment Officer to replace Gross. With Bill Gross' abrupt departure, Pimco's $222 billion flagship Total Return Fund has been taken over by Scott Mather, Mark Kiesel and Mihir Worah.

"The fund's Bronze Morningstar Analyst Rating reflects Morningstar's high level of confidence in PIMCO's resources and overall abilities but also the uncertainty as to exactly how all of these parts will mesh in the wake of Gross' departure," Morningstar analyst Eric Jacobson wrote in a report on Monday.

Since the start of the year, investors have pulled $25 billion from the Pimco Total Return Fund, the world's largest bond fund, according to Morningstar data as of the end of August. This latest downgrade could set off another chain reaction of negative cash outflow momentum for the Pimco Total Return Fund.

Pimco CEO Doug Hodge said on Monday that the investment group is bracing for investors to pull out money following Gross's departure but expects the vast majority of clients to stick with the firm and is confident it can handle any outflows.

Hodge said there had been differences with Gross over the strategic direction of the firm but not over investment strategy.

"Mark, Mihir and I intend to harness our individual and collective skills to continue to deliver the same excellence to investors they have come to expect from PIMCO's Total Return Fund," Scott Mather, CIO Core Strategies said in response to Morningstar's downgrade.

Morningstar evaluates mutual funds based on five key pillars, which it believes leads to funds that are more likely to outperform over the long term on a risk-adjusted basis. A "gold rating" is assigned to a Best-of-breed fund that has garnered the analysts' highest level of conviction.

"It will take some time to see how Ivascyn and the new managers will coalesce as a team in their new roles, but there are a number of reasons to believe they will be successful after the dust settles," Morningstar said.

© 2017 Thomson/Reuters. All rights reserved.

 
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Morningstar downgraded its analyst rating on the Pimco Total Return Fund to "bronze" from "gold," citing uncertainty about outflows and the reshuffling of management responsibilities after the exit of co-founder Bill Gross.
Morningstar, Pimco Total Return Fund, Gold Rating, Bill Gross
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2014-31-30
Tuesday, 30 Sep 2014 07:31 AM
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