Jeffrey Gundlach's DoubleLine Capital has been up and running for just a few months following his very public firing from TCW, where he managed more than $70 billion in the TCW Total Return Fund before being unceremoniously fired in one of the uglier oustings in the mutual fund world's recent memory (think porn, pot, and theft allegations). Lawsuits are flying in both directions, but in the meantime Gundlach is back with a new company and a new flagship fund, DoubleLine Total Return (symbol DBLTX), that just crossed $800 million in assets under management to become one of the fastest-growing new funds of the year. The one-time candidate for Morningstar's manager of the decade talks with U.S. News about his new company, his old employer, and why he expects his mortgage portfolio to prosper no matter which way the housing market breaks.
How's the start-up life?
Good. It's a lot of work. The true start-up phase of things is kind of a blur. Now that we're five or six months into it, it's a little calmer. We've settled into a routine managing portfolios. It's tough at first, but we're kind of in the having fun phase now.
How are the funds doing attracting capital?
It's pretty good. There was an article from Morningstar that we're the most successful asset gathering mutual fund launch of the year even though we didn't launch early in the year. We launched in April, so we've only been up and running basically two months. Our funds have raised over $800 million in two months, which is pretty good. What helps is we've had top performance already.
How do you expect capital flows to progress through the year?
We've raised about $3.2 billion so far in total for the firm. In the last couple months we raised about $1 billion. That pace would be what we're hoping to sustain. So, we've got six months to go. I'd like to see $6 billion to $8 billion in assets at the end of the year. Certainly I think we'll achieve the low end of that.
[For background, see Sex, Drugs and Mutual Funds from U.S. News.]
Will that be in funds or separate accounts?
We're launching some private funds and there will be money raised there. I would expect the growth to be two-thirds in the funds and one-third from other sources, away from the mutual funds. If we exceed the high end of our expectations, it would be because of greater success in institutional business.
Could ongoing litigation with TCW scare off some of that institutional money?
At the end of the day, investments are about performance success. Institutional clients have many choices of firms to go with. They get their door knocked on several times a day. Any sort of question mark at all becomes an easy reason to winnow the list down. If someone's throwing a specious lawsuit against you, you might know it has no legitimacy but it's still a reason [for institutional clients] to wait and see. At some point, the performance will attract customers. That's already happening. Then, the question mark gets trumped by, to put it in a pejorative way, the greed factor.
Who won in this mess? There were a lot of outflows from TCW. Who benefitted?
Nobody. Nobody won. What ended up happening is tremendous wealth was destroyed by TCW's actions. A lot of other firms probably got a little bit of money.
What did you learn from getting fired by TCW?
I didn't learn anything. I have a different job. I'm a CEO of what's going to be a very successful firm. I was basically running within TCW, where businesses are very standalone, by far the biggest business. I know very well how to run a big business. We're not a big business yet, but we're not exactly puny either. What I took away from it is there are a lot of evil people in the world. That's what I learned from it.
Did the knowledge and strategies you left at TCW change the competitive landscape for you now?
No. The MetWest team [Ed.: MetWest was bought by TCW to run its fixed-income business] never had much success in the strategies my team developed. They have a different approach. Some of their things work reasonably well, some things work very badly. But nothing we do at DoubleLine resembles what that team ever did. I don't think just because they changed the name on the letterhead that it makes them more competitive.