(PUB) Morningstar FundInvestor

February 2 014

Morningstar FundInvestor

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lead manager on two funds until now, PIMCO Global Advantage Strategy Bond PGSAX and PIMCO Global Multi-Asset PGMDX , but they are comparatively small funds. The longer-term impact of this news is a bigger ques- tion mark. El-Erian has been a crucial, senior voice on PIMCO ’s investment committee and one of only a handful of people who have likely had the right mix of traits necessary to strongly challenge and help in- fluence Gross’ opinions. His loss is particularly sig- nificant given the retirement of Paul McCulley in Dec- ember 2010 . There are topnotch people already on and about to join the committee, but it remains to be seen whether they will be able to effectively play the devil’s advocate role in that group, a role Gross has always professed to value highly. Fidelity’s O’Hanley to Step Down Ron O’Hanley, Fidelity’s head of asset management since July 2010 , is stepping down from his role. An internal successor will be named in the coming weeks. O’Hanley will work with his successor during a transition period through late February. He has no immediate career plans but will likely return to the asset-management industry after a break. A succession plan for longtime chairman Ned Johnson was clearly established last year when daughter Abby Johnson took on the title of president, over- seeing O’Hanley and the asset-management division. O’Hanley had also led the corporate services division since joining Fidelity in 2010 , a role he relinquished in late 2013 to Geoff von Kuhn. As a result, O’Hanley’s successor will focus solely on asset management. Western Asset Fined by SEC SEC sanctions against Western Asset prompted us to put the Analyst Ratings for Western Asset Core Plus Bond WACPX and Western Asset Core Bond WATFX under review. On Jan. 27 , the Securities and Exchange Commission announced sanctions against Western Asset Manage- ment for actions allegedly undertaken during the financial crisis. The official SEC press release alleges

that the firm concealed losses after making a coding error and engaged in improperly executed cross trading that favored some clients over others. The firm agreed to pay roughly $ 21 million in fines but did not admit nor deny the charges. This did not have an impact on shareholders in this fund, but the charges have prompted Morningstar analysts to put this fund under review in order to further evaluate the charges and determine if the firm has implemented appropriate risk controls to avoid future issues. The SEC sanctions notwithstanding, the financial crisis of 2008 raised other concerns when the firm’s flag- ship core and core plus bond portfolios, including this fund, were tripped up by large stakes in nonagency mortgages, corporate-bond missteps, and the assump- tion of too much risk overall. Underperformance across the firm’s lineup during the financial crisis revealed some flaws, including weaknesses in credit research, ineffective risk oversight, and gaps in communication between macro and fundamental research. Since 2008 ’s disappointing run, the team behind this fund has made a number of improvements to its invest- ment process and risk management and has strength- ened its resources across the board. BlackRock Manager Accused in Italy Italy’s Commissione Nazionale per le Societa e la Borsa (Consob) says BlackRock’s chief investment officer of non-U.S. fundamental equity investing, Nigel Bolton, traded on nonpublic information when he sold shares of Italian oil- and gas-services company Saipem four days before a profit warning in January 2013 . BlackRock says the allegations are unfounded and is contesting them. A BlackRock spokesman said Bolton, who also serves as the head of European equities for the firm, sold BlackRock’s entire stake in Saipem in a block trade on Jan. 25 , 2013 , after a Barclays analyst dras- tically cut his earnings forecast for the company before the market opened. BlackRock’s own investi- gation found no evidence of improper trading, the spokesman said. œ