While most people are familiar with PIMCO’s Bill Gross, there is a new Bond King on the rise that investors who do not also work in finance are less familiar with. His name is Jeffrey Gundlach, and he is the co-founder and CEO of DoubleLine Capital. Unlike Gross who is on TV talking markets it seems at least once a week, Gundlach is a little more private. Another reason Jeffrey Gundlach is less well known currently than Gross, is because DoubleLine is a relatively new firm, founded in 2009.
Jeffrey Gundlach and his team are not new to the markets however, and as you can read more about below, there is a rather interesting story about how Doubleline came to be. His firm is now the fastest growing mutual fund in history, the Doubleline Total Return Fund, and took in more money than any other mutual fund for the first half of 2012. The fund now has $28 Billion under management and is up 9% over the last 12 months, beating 98% of funds in its class.
According to a recent article in Businessweek, Gundlach started from humble beginnings in Buffalo, NY where he grew up. His father a chemist and his mother a stay at home mom. With the help of financial aid he was able to attend Dartmouth where he graduated ssumma cum laude in math and philosophy in 1981. After obtaining his undergradutate degree he enrolled in Yale’s applied mathematics Ph.D program. However he dropped out of that program because they were not forward thinking enough for him, and decided to become a drummer in punk rock band called Radical Flats. Here is a picture of Jeff Gundlach the rock n roll star:
After watching an episode of “Lifestyles of the Rich and Famous”, Gundlach decided he would apply his math skills to become an investment banker.
According to Gundlach, he basically cold called TCW and talked his way into an interview. He had read Sidney Homer and Martin Leibowitz’s Inside the Yield Book to help prepare for the interview. After speaking with some of the people there he said it was obvious that he already knew more than many of them who didn’t really understand the in depth math behind bond investing. Needless to say he impressed in the interview and got a job as a fixed income analyst.
By the time he was 28 Gundlach was a rising star at the firm, and was already managing $500 million in capital. Gundlach’s specialty was and is until this day investing in mortgage backed securities, which are basically pools of mortgages which are packaged together and sold as one instrument. In fact he was so good at it, that he quickly rose to be TCW’s top portfolio manager. Gundlach and his team were responsible for the TCW Total Return fund, one of the top performing bond funds in the world. By 2009 the largest percentage of the firm’s assets were in the TCW total return fund.
This is were the story starts to take different forms depending on which side of the conflict is giving you the story. TCW claims that in 2009 Gundlach was getting ready to start his own rival firm to TCW and was planning to steal staff and trade secrets to do so. Without any discussion on the subject with Gundlach himself, they decided to fire him. Gundlach on the other hand claims that he had no such plans, and that he was caught completely off guard by the firing.
Regardless of whom you believe, Gundlach did in fact start his own firm after his firing, and he ended up taking 90% of his team with him. The divorce was messy and TCW ended up taking Gundlach to court, claiming that he stole trade secrets. Gundlach then countersued saying that by firing him, TCW had cheated him out of millions of dollars of compensation he was due. They settled in late 2011 and the terms of the deal were not disclosed.
Shortly after he was fired from TCW, Gundlach convinced another top TCW portfolio manager Phillip Barach to found the own fund company known as DoubleLine Capital. In addition to Barach, Gundlach convinced about 90% of his team from TCW to join him at DoubleLine. He has remained very loyal to his team as a result of their confidence in him recently saying:
“Three years ago, there were more than 40 of you who jumped off the diving board with me, believing that there would be water in the pool by the time you got there,” he said, raising a glass of Cristal. “I’ll never forget that.”
Much of the money that Gundlach managed under the TCW Total Return Fund left with Gundlach for his new firm DoubleLine Capital and specifically the DoubleLine Total Return Fund. By 2012 they had become the fastest growing mutual fund startup in history. In just 3 years the firm had raised $50 Billion in capital. To celebrate the accomplishment Gundlach threw a party for his staff, and the restaurant he chose was in the basement of TCW’s building.
We will be updating the below sections each time there is a new interview or presentation