Bill Gross. Source: PIMCO.

Less than two months ago, mutual fund giant PIMCO suffered a huge loss, as Bill Gross decided to leave the company and work for Janus Capital Group (NYSE:JNS) instead. The impact of the move was immediate and dramatic, with many investors in Gross' former flagship PIMCO Total Return Fund (NASDAQMUTFUND:PTTRX) withdrawing tens of billions of dollars in assets. But the longer-term effects of Gross' departure are just now starting to trickle in, and the chain reaction has some wondering whether PIMCO will ever be the same.

Morningstar pans PIMCO funds
Following Gross' departure, mutual-fund research specialist Morningstar (NASDAQ:MORN) put all 39 PIMCO funds under review in its proprietary ratings process, acknowledging the influence the founder, managing director, and chief investment officer had over PIMCO's entire operations. After its review, Morningstar made substantial changes to the ratings of PIMCO's fund lineup.

On the downside, Morningstar downgraded more than a dozen different PIMCO funds. The popular PIMCO Commodity Real Return Strategy Fund got a one-level reduction from "Gold" to "Silver," as did two emerging-market bond funds and the PIMCO Real Return Fund. Five other PIMCO bond funds got downgrades from "Silver" to "Bronze," and the closed-end PIMCO Corporate & Income Opportunities Fund saw its rating fall from "Bronze" to "Neutral."

For a few funds, the drop was even more severe. PIMCO Low Duration Fund saw its rating fall two steps from "Gold" to "Bronze," while PIMCO Emerging Markets Currency and PIMCO Inflation Response Multi-Asset suffered downgrades from "Silver" to "Neutral."

The reasons for the downgrades varied from fund to fund. With some of PIMCO's funds, Gross played a direct role in leading the management team, so his departure will have an obvious impact on fund operations going forward. Yet even those funds that didn't have Gross directly involved will nevertheless see some changes as many internal personnel at PIMCO shift roles to fill in gaps. In several cases, poor market performance also contributed to the downgrade, which presumably would have been an issue even if Gross had remained at PIMCO.

To be fair, Morningstar didn't downgrade all of PIMCO's funds. Last month, Morningstar reaffirmed its current ratings for five PIMCO funds, including the "Gold"-rated PIMCO All-Asset Fund. Morningstar even upgraded the PIMCO Municipal Bond Fund to a "Bronze" rating. But the fact that so many PIMCO funds were downgraded made it easier to dismiss the few exceptions to the rule.

Is PIMCO done?
The effect of these downgrades on PIMCO's reputation isn't entirely clear, but at best, they will bring more negative publicity at an already tough time for the fund giant. Seeing four funds lose "Gold" status -- which Morningstar argues shows best-of-breed characteristics that distinguish themselves for performance, value, and other attractive attributes -- is a major blow to PIMCO. Even though Morningstar maintains that its lower ratings still largely indicate positive performance, investors might well see it another way.

PIMCO still aims to connect with its communities. Source: PIMCO.

For its part, Morningstar doesn't think PIMCO is doomed by Gross' departure. Earlier this week, an analyst at the mutual-fund research firm said that PIMCO could deal with a reduction of as much as $300 billion to $350 billion in assets under management without hurting seeing its overall performance suffer.

The key, though, will be whether any redemptions from PIMCO funds come gradually or all at once, as high-volume withdrawals could put pressure on funds to sell off assets quickly and cause a cascading market reaction that, in turn, could send prices of fund investments spiraling downward. At least for now, Morningstar sees withdrawals from PIMCO funds as moderating, suggesting that the worst could be over with regard to assets under management.

Even if PIMCO does find a way to survive its latest leadership crisis and chart a course for its future, it'll take a long time for the fund company to move beyond the Bill Gross era and regain its former glory. For now, though, investors should be satisfied with the simple fact that PIMCO is not in imminent danger of collapse after Gross' departure.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.