For the first time in its 32-year history, the flagship Pimco Total Return Bond Fund (PTTRX) has found itself hoisting less than a four-star overall performance rating from Morningstar.
While the fund-tracker gives the $65 billion fund its highest-level gold rating for forward-looking
portfolio management, the fund is now saddled with an overall performance rating of three stars.
The high-profile fund, which managed more than $285 billion at the end of 2012, could see more investors leave in response to the lower star rating if the lower rating triggers some investment screens.
"Star ratings in general can help you sort through the fund universe and make it easier for an adviser to have an understanding of the fund," said Todd Rosenbluth, director of mutual fund and ETF research at CFRA.
The Pimco Total Return Fund, which is offered in seven different share classes, has long been the signature portfolio of Pacific Investment Management Co., a firm founded by
legendary bond investor Bill Gross.
Mr. Gross managed the fund from its inception in 1987 through September 2014, when he
abruptly departed to join Janus Henderson Group. Mr. Gross announced his retirement in February after four decades of managing bond portfolios.
In fairness to the three-person team that took over management of the Pimco fund upon Mr. Gross' departure, the lower star rating is likely attributable to the elimination of the strong performance in 2008 from the fund's 10-year performance record.
The fund, which finished 2008 with more than $132 billion, gained 4.82% that year, while the intermediate-term bond fund category average was a 4.7% decline.
After the asset-peak of 2012, the
net outflows were steady, dropping to less than $90 billion at the end of 2015 from more than $143 billion at the end of 2014, the year Mr. Gross departed.
However, as Mr. Rosenbluth pointed out, the assets have stabilized under the new management team of Mark Kiesel, Scott Mather, and Mihir Worah.
The fund's 2.6% gain in 2016 lagged the category's average return of 3.2%, but the fund outperformed the category average in 2015, 2017 and 2018.
"The asset base has shrunk, but it has shrunk at a lower degree than it did during the under-performance of Bill Gross and the outflows from when he departed," Mr. Rosenbluth said. "The investor base has gained comfort, and they now seem to be relatively loyal. The fund has had success in recent years, which might suggest it is worthy of staying in someone's portfolio if it's already there."
A representative from Pimco declined to comment for this story.
