Jeffrey Gundlach reaches for bond king crown as DoubleLine's active ETF closes in on Pimco

Better performance and State Street's distribution muscle are key success factors

Jun 22, 2016 @ 12:23 pm

By Jeff Benjamin

The ongoing battle for bragging rights between DoubleLine and Pimco is about to shift in favor of DoubleLine, as its actively managed bond ETF — with Jeffrey Gundlach at the helm — gets closer to eclipsing Pimco's version of the strategy.

According to the latest data from Morningstar, the SPDR DoubleLine Total Return Tactical ETF (TOTL) has reached $2.55 billion, which puts it just $20 million behind the Pimco Total Return Active ETF (BOND).

Taking over the top spot, likely to happen at any moment, probably means more to those inside DoubleLine than to the broader asset management industry. But it does say something about the shifting dominance among the two California-based fixed-income powerhouses.

“BOND has lost its star power with Bill Gross leaving Pimco, and that hurts the fund's ability to gather assets,” said Christian Magoon, chief executive of Amplify ETFs.

Both funds launched to much fanfare. The Pimco fund ranked as the second-most successful ETF launch ever when it took just three months to reach $1 billion.

The Pimco fund is now being managed by the trio of Scott Mather, Mark Kiesel and Mihir Worah. Pimco did not respond to a request for comment for this story.

The DoubleLine fund reached the $1 billion mark in five months.

Most noteworthy about the changing of the guard is that the Pimco fund is three years older than the DoubleLine fund, which launched in February 2015, five months after Bill Gross left Pimco to join Janus Capital Group.

So far this year TOTL has gained 2.78%, which compares to 2.16% for BOND.

But both funds lag the Barclays US Aggregate Bond Index, up 3.45%, and the Morningstar intermediate-term bond category, up 3.34%.

“TOTL has been the better performer in 2016 and the one with a long-tenured management team,” said Todd Rosenbluth, director of mutual fund and ETF research at S&P Capital IQ.

“Investors are familiar with both firm's active bond products, but the ETFs are following the same trend of their mutual fund siblings, and Pimco's recent mutual fund flows problems have spilled over into the ETF market this year,” he said. “In addition, DoubleLine is benefitting from a large distribution partner in State Street Global Advisors that has well-established ETF relationships with institutional investors and advisory firms, and they have made TOTL one of its priorities this year.”

DoubleLine executive vice president Ron Redell attributes TOTL's asset growth to the stability of a portfolio management team made up of Mr. Gundlach, Philip Barach and Jeffrey Sherman.

“Investors and advisers seek a number of criteria for their actively managed core fixed income portfolios,” Mr. Redell said. “Risk-adjusted performance as measured by Sharpe ratio or other metrics is key; in other words, return with safety. But they also want longevity in the investment team.”

With that said, it would be difficult to deny the impact of State Street's salesforce in helping drive assets into TOTL, which is technically a State Street fund that is subadvised by DoubleLine.

“State Street has a significant presence in the ETF industry and is an accretive partner for DoubleLine to launch an ETF with,” Mr. Magoon said.

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