Money & Company

Tracking the market and economic trends
that shape your finances.

« Previous Post | Money & Company Home | Next Post »

Ex-TCW fund manager Gundlach partners with Oaktree Capital

December 14, 2009 |  7:03 am

Star bond fund manager Jeffrey Gundlach, fired by L.A. money manager TCW Group on Dec. 4, said Monday he would partner with Oaktree Capital Management to launch a new investment firm.

The agreement with Oaktree will unite Gundlach with a group of former TCW executives who broke away from the firm in a bitter split in 1995. Oaktree has since become a major global investor in junk bonds and private equity deals.

Gundlach said his new company, DoubleLine LLC, would tap Oaktree for help to create an "operational infrastructure" as a prelude to launching investment funds. Oaktree would become a minority investor in DoubleLine.

Gundlach, who had been at TCW for 24 years and was named chief investment officer in 2005, is widely known on Wall Street for his expertise with complex mortgage-backed securities.

Gundlach (2) The TCW Total Return Bond mutual fund, managed by Gundlach, scored an annual average total return of 7.7% over the last 10 years, outperforming nearly all of its rivals.

In a surprise move that stunned the money management world, TCW Chief Executive Marc Stern on Dec. 4 said Gundlach was "relieved of his duties." The firm, which manages about $110 billion in assets, said it acted because Gundlach had "threatened to leave TCW and take key personnel with him."

TCW simultaneously said it would buy Metropolitan West Asset Management, a West L.A.-based firm that manages about $30 billion in bonds, to take over Gundlach’s bond portfolios.

Gundlach, 50, has denied giving TCW an ultimatum, but acknowedged that he had grown frustrated with the firm’s direction, and that he had had informal discussions this year with other money management companies.

French banking giant Societe Generale, which bought control of TCW in 2001 from founder Robert Day, announced early this year that it planned to sell or spin off the firm within five years, raising questions about the company’s future ownership.

Gundlach last week said he intended to quickly jump back into the money management business, hoping to lure away many of his former TCW clients. He said Monday that more than 30 of his former team members at TCW had left the firm to join him at DoubleLine.

Investors pulled about $3.5 billion from the $12-billion TCW Total Return Bond fund last week, reacting to Gundlach’s departure.

Gundlach’s new partner, Oaktree, was formed in L.A. in 1995 by five TCW executives.

The five, including junk bond experts Howard Marks and Bruce Karsh, had sought an amicable split with TCW. They proposed setting up their own venture and transferring $7 billion of TCW’s then-$48 billion in assets to the new firm, while sharing management fees with TCW for a number of years.

That idea was angrily rejected by TCW founder Day, who said the move by Marks, Karsh and the three other managers was "disloyal at the very least."

Stern, who was president of the firm in 1995, backed Day, saying at the time that the proposal "didn’t make sense to us."

Oaktree has since grown to manage about $67 billion in total assets for institutional clients such as pension funds.

In part, TCW’s rebound from the loss of the Oaktree managers in the late 1990s was driven by Gundlach’s success investing in mortgage-backed bonds, bringing billions of dollars in fresh assets to the firm over the last decade.

Marks, who in the early 1990s had worked with Gundlach and other ex-TCW money managers who have joined Gundlach at DoubleLine over the last week, said in a statement Monday that "given our long history . . . we were happy to agree to help them establish their new business."

-- Tom Petruno

Photo: Jeffrey Gundlach. Credit: Los Angeles Times

 

Comments 

Advertisement










Video