Star fund manager says he doesn't want to resort to 'shadow markets' like derivatives.
Jeffrey Gundlach may be one of the biggest stars in money management today, but he plans to keep the size of his firm in check.
Mr. Gundlach doesn't see DoubleLine Capital LLC, the asset management firm he founded in 2009, growing to more than about $100 billion in assets under management total, he said yesterday during a presentation for financial advisers at the New York Yacht Club.
The firm currently manages around $52 billion, about $40 billion of which is in its flagship total-return strategy.
The main reason Mr. Gundlach would shutter the fund to new investors is that he doesn't want to have to resort to using derivatives to access markets.
“In fixed income, you should not be investing in shadow markets,” he said. “Everything we own is publicly traded. There're no derivatives and no counterparty risk.”
He sees the $40 billion DoubleLine Total Return Fund (DBLTX) being forced to close at around $100 billion maximum, but it could close sooner.
“In 2009, we could have managed up to $1 trillion, but the environment's not what it used to be,” he said. “Now it will never grow to $100 billion and probably not even $75 billion.”
Mr. Gundlach is keeping a close eye on the size DoubleLine's newly christened equity division, as well. The recently launched DoubleLine Equities Small Cap Growth Fund (DBESX) has a maximum size of around $2 billion, Mr. Gundlach said.
He has plans to launch more equity funds, and two others already have been approved by the Securities and Exchange Commission, but all-in, Mr. Gundlach sees that part of the business topping out at around $10 billion.
“Equity funds in general shouldn't manage more than $10 billion,” he said. “You can't buy $1 billion worth of stock and think you're going to get out of it.”
He pointed out fallen star managers Bill Miller and John Paulson as investors who grew too big to succeed.
DoubleLine also offers a hedge fund, with more planned, as well, but those strategies are naturally limited in size, so that will top out at around $10 billion too, Mr. Gundlach predicted.
