It's official. Morningstar has weighed in on the ongoing mishegas at Pimco.

And the verdict? Um, mishegas matters.

A report written by Michael Herbst, director of active fund management, outlines how Morningstar researchers have "reassessed" their view on the bond giant and a number of its fund "in light of several events surrounding Mohamed El-Erian's recent departure from the firm."

For example, on March 18, the research firm lowered its Stewardship Grade on Pimco from B to C. Analysts also lowered the Parent pillar score, one of Morningstar's five, from Positive to Neutral.

For example, Herbst writes this on the departure of El-Erian, as well as that of some PMs:

It wouldn't be surprising if we were to see additional ripple effects from El-Erian's departure. Although it's difficult to predict exactly what those effects could be, we are keeping a close eye on several areas, including any future personnel changes. Future departures of key managers would trigger reassessments of individual funds or groups of funds. Should that trickle of departures increase, we'd look to identify whether recurring themes were driving managers' departures and whether those departures were truly detrimental to the firm's research depth. Departures of any of the sector heads or new deputy CIOs (Worah, Mark Kiesel, Dan Ivascyn, Maisonneuve, Scott Mather, and Balls), for example, would be red flags.

However, Morningstar reaffirmed ratings on a number of Pimco funds and stated that co-founder and CIO Bill Gross "remains invaluable to PIMCO's stability as an asset manager and, thus, a big part of PIMCO's value to Allianz."

Hebrst wrote that analysts will keep aggressive tabs on Pimco's evolving succession plan for Gross as well as the performance of incoming managers.  

Edited by: Tommy Fernandez


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