NEW YORK (TheStreet) -- Morningstar Tuesday downgraded Pimco's Total Return Fund (PTTRX) , the top performing bond fund managed by Bond King Bill Gross from 1987 through his surprise resignation on Friday. Morningstar now gives the fund a "bronze" rating as a result of the uncertainty caused by Gross' departure.
"Morningstar remains positive overall on Pimco Total Return after the departure of Bill Gross but is downgrading the fund to Bronze because of the resulting uncertainty regarding outflows and the reshuffling of management responsibilities," the firm said in a late Monday downgrade.
Morningstar said it will take some time to see how the new managers of Pimco's Total Return Fund will coalesce, but that the bronze rating reflects the firms high level of confidence in Pimco in the wake of Gross's departure.
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Morningstar said it is possible that outflows following Gross' move to Janus Capital Group (JNS) departure could rise, however, the firm's position in liquid assets might buffer against volatility. Pimco Total Return holds 42% of its assets in U.S. Treasury bonds and agency mortgages, which gives Morningstar "cautious optimism that the fund should be able to withstand a significant storm."
Meanwhile, Gross' Total Return Fund has already suffered significant outflows. The fund saw roughly $70 billion in outflows from its May 2013 asset peak to September without any problems. In fiscal 2014, the Total Return Fund has generated over $641 million in advisory fees and $608 million in administrative and supervisory fees.