The font of all mutual-fund expertise thinks Evensky and Katz Wealth Management may be overreacting, if only just a little. Sure, no one likes to hear all of the talk about how PIMCO chief Bill Gross is kinda maybe a sort-of borderline tyrant, but it’s just talk. Morningstar would prefer to focus on the real issues arising from Mohamed El-Erian’s exit, which those gossip-peddlers in the MSM choose to ignore in favor of eye-contact preferences, communication demerits and one individual’s efforts to reinvent himself in the face of their revelations.
We’ve been delving into that question in a series of extensive conversations with PIMCO’s leadership. Since the changes were announced, Morningstar analysts have been in frequent contact with PIMCO’s senior leadership, including Gross, Mihir Worah, and other portfolio managers directly or indirectly affected by the changes. We’ve also had extensive conversations with other members of PIMCO’s leadership, including CEO Doug Hodge. These conversations culminated in an on-site visit to PIMCO on March 10, 2014.
Given our current view, we have lowered PIMCO’s overall Stewardship Grade to C from B, with an A grade being the highest possible and F the lowest. We have also lowered PIMCO’s Parent Pillar score–one of the five pillars of the Morningstar Analyst Rating for Funds–to Neutral from Positive. Those changes reflect a higher degree of uncertainty around the firm’s recent personnel changes and lower manager investment alongside fund shareholders….
That litany of defections may look alarming when assembled in a single narrative, but it is arguably less of a worry than it might seem. PIMCO’s case for depth is compelling, boasting more than 240 people in portfolio management roles around the globe, and among them more than 70 considered key contributors with a median average of roughly 17 years of experience. In addition, PIMCO’s demonstrated history of picking leaders to fill in for those who have moved on suggests the firm has proved to have an uncanny ability to thrive in the wake of key personnel losses.
Morningstar’s Current View on PIMCO [Morningstar Fund Spy]