Home ListingMarch 19, 2014

PIMCO’s Bad Month Continues with Stewardship Downgrade

<i>Morningstar analysts have downgraded PIMCO’s stewardship grade from B to C following a visit to the California-based fund company.</i>

Reported by Featured Author

(March 19, 2014) — Morningstar analysts have provided a further headache for PIMCO’s management board, having downgraded its stewardship rating from a B to a C.

The downgrade reflects the higher degree of uncertainty after the departure of its Chief Executive Officer Mohamed El-Erian and other key personnel, and the lower levels of investments by PIMCO managers in their own respective funds.

“The changes to PIMCO’s Stewardship Grade and Parent Pillar score do not automatically affect PIMCO funds’ overall Morningstar Analyst Ratings for Funds, yet it is logical to assume that Morningstar analysts would move quickly from here to reassess those ratings on a fund-by-fund basis,” the analysts said.

Morningstar added that it was preparing a follow-up piece for early April 2014 that would summarise its current opinions on individual PIMCO funds.

“In that piece we’ll also answer a number of PIMCO-related questions that we have been receiving most frequently from investors,” it concluded.

PIMCO has had a difficult March, with co-founder Bill Gross being involved in an increasingly ugly-looking separation from his former heir apparent El-Erian, who left the firm earlier this month.

The firm, which had $1.9 trillion in assets as of the end of 2013, has also been under pressure in the past 12 months amid underperformance and withdrawals from its largest fund, Total Return.

The fund declined 0.5% in the past 12 months, according to Bloomberg data, trailing 82% of rivals and underperforming the Barclays US Aggregate Index.

El-Erian caused a social media frenzy earlier this week by setting up a new Twitter profile, following his departure from PIMCO.

Sporting the Twitter handle @elerianm, El-Erian has been posting frequently since joining on March 17, commenting on everything from the Ukraine crisis to Janet Yellen’s first Fed meeting as chairman.