Jeffrey Gundlach hasn't lost his investment magic — or his famous ego — while running DoubleLine Capital LP, the money manager he formed after his highly publicized firing from TCW Group last December.
In an interview, he touted his market-beating performance over two decades and listed the traits that got him there: “I am unbelievably patient; I have a memory like an elephant, and a very high ability to focus.”
So far, the combination is serving him well.
His biggest mutual fund, the $2 billion-plus DoubleLine Total Return Bond Fund (DBLTX), returned 10.05% from its April 6 inception through last Monday.
“Mr. Gundlach and his team have shown themselves to be skilled in diversifying a fund with various securities that stand up to the difficult market environment,” said Miriam Sjoblom, Morningstar's associate director of fund analysis.
But the $5 billion DoubleLine has under management in a dozen fixed-income strategies is a fraction of the $70 billion that Mr. Gundlach oversaw at TCW before his ouster Dec. 4.
His termination in a dispute over control of the company occurred on the same day that TCW officials said that they had acquired a competing fixed-income manager — Metropolitan West Asset Management — to take over from Mr. Gundlach.
Undaunted, he said that he expects to be managing $6 billion to $8 billion by the end of the year. He also said that as of July, DoubleLine was in the black — seven months after opening its doors.
Still, Mr. Gundlach said that it probably will take some time to gain institutional investors, which made up $57 billion of his $70 billion in assets at TCW.
To gain institutional investors, he acknowledged, DoubleLine needs to be vetted by consultants.
One consultant hurdle that DoubleLine has overcome is that the firm is profitable. Another still to cross: Some consultants will recommend a firm to institutional investors after one year, while others want to see a three-year track record.
Still another big obstacle is the pending litigation between Mr. Gundlach and TCW. After 45 of the 60 members of his TCW team followed him to DoubleLine, TCW filed suit, claiming that he conspired with co-workers as part of a plan to form a competing firm.
Mr. Gundlach countersued TCW and its parent, Société Générale, charging that he was terminated as part of a plot to deprive him of hundreds of millions of dollars in compensation that he was due. He expects the suits to be resolved in the first quarter of next year.
Jeffrey MacLean, chief executive of Wurts & Associates Inc., an investment consulting firm, said that the lawsuits are Mr. Gundlach's biggest hindrance to getting institutional assets.
“A consultant doesn't want to recommend placing money with a firm and then have something disrupt that portfolio,” he said. “There needs to be closure in the court case.”
Overall, he is bullish on Mr. Gundlach's new firm. “He is a talented bond manager,” Mr. MacLean said.
But Mr. MacLean said that Mr. Gundlach also faces challenges in starting a fixed-income shop in an environment where mega-managers such as
BlackRock Inc. and Pacific Investment Management Co. LLC dominate areas of increasing interest to clients, including credit, currency, international bonds and private placements.
“These kinds of capabilities are a harder thing to manufacture over a short period of time,” he said.
Mr. Gundlach said that his team is experienced in various segments of fixed income.
The fact that many TCW co-workers followed him to DoubleLine is evidence that he inspires loyalty. But Mr. Gundlach acknowledged that dealing with him is an acquired taste.
“I can be charming, I can be uncharming,” he said.
In informal conversations withPensions & Investments, a few of his employees said that Mr. Gundlach doesn't mince words. If someone has erred, he lets him or her know, quickly and directly.
One said that Mr. Gundlach has gotten in his face more than once when he was displeased with his performance. But the employee said that he would rather work for a strong leader such as Mr. Gundlach — and have the potential to make lots of money — than a mediocre manager who isn't as successful in creating wealth for his employees.
Mr. Gundlach said that there are advantages to managing a smaller portfolio, such as being more selective. “If you manage $70 billion, you're going to have to say yes to the marginal securities,” he said.
Randy Diamond is a reporter with sister publication Pensions & Investments.
