Gundlach's fast-growing startup sees nearly $6B in inflows in a year

Firm has been surrounded by controversy since it launched in 2010

May 8, 2011 @ 12:01 am

By Jessica Toonkel

Despite months of legal wrangling with his former employer, TCW Group Inc., it appears that Jeffrey Gundlach's move to start his own firm is paying off.

According to research released last week, his firm, DoubleLine Capital LP, is the fastest-growing startup fund company ever.

Since its funds went live in April 2010, DoubleLine has seen $5.9 billion in net inflows, according to research released last week by Strategic Insight.

“Going back 25 years, we found that DoubleLine was the fastest-growing startup fund company,” said Dennis Bowden, senior research analyst at Strategic Insight.

The massive fund flows are good news for a fund company that has been surrounded by controversy since it launched last year.

TCW terminated Mr. Gundlach as its chief investment officer in 2009 and subsequently filed a lawsuit against him, claiming that he and three former senior TCW managers who joined his firm stole proprietary information and clients.

In February, DoubleLine and Mr. Gundlach filed a cross-complaint against TCW, charging breach of contract. They also filed an answer to the TCW lawsuit, stating that trade secret theft and other charges are meritless.

That case is set to go to trial in California Superior Court on July 25.

But the fact that financial advisers are putting money into DoubleLine shows that they are more interested in investment returns than in any controversy surrounding the lawsuit, said Ron Redell, president of DoubleLine Funds.

“The financial adviser community has moved on,” he said.

DoubleLine's substantial inflows are particularly notable given that most small fund managers that gained traction last year were equity fund players, Mr. Bowden said.

In general, boutique managers saw big inflows last year. Twenty of the top 25 fastest-growing fund firms during the 12-month period through March 31 had less than $5 billion as of that date, according to Strategic Insight.

Twenty-seven billion dollars of the $56 billion that went to these 25 firms went into U.S equity funds.

Of the 25 fastest-growing managers, bond funds accounted for just $11 billion of total net inflows. At the same time, equity funds in general saw $6 billion in outflows, while bond funds saw $200 billion in net inflows during the same period, according to Strategic Insight.

“These flows show there is a lot of investor and adviser demand for high-conviction, specialist boutique managers,” Mr. Bowden said.

DoubleLine stands out among its small-manager peers because Mr. Gundlach is already a known quantity, Mr. Bowden said.

“They are a unique case because Mr. Gundlach had a track record,” he said.

E-mail Jessica Toonkel at jtoonkel@investmentnews.com.

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