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TCW conference call: Investors pulled 30% of assets from Gundlach-managed fund

December 11, 2009 | 12:26 pm

Some highlights from the investor conference call held this morning by Tad Rivelle, who took over the reins of most of TCW Group's bond funds after the big L.A. money manager unexpectedly ousted veteran investment chief Jeffrey Gundlach one week ago:

--- Redemptions from TCW's flagship Total Return Bond fund, which under Gundlach had been one of the top-performing fixed-income funds in the U.S. over the last decade, have totaled $3.5 billion this week, reducing assets to $8.5 billion.

Rivelle called the redemptions "very substantial," accounting for about 30% of the fund. But he said the dollar amount of funds that investors pulled on Thursday was down more than 80% from what flowed out on Monday, suggesting that the worst had passed and that most remaining investors might stick with the new management team.

Rivelle --- Rivelle and co-manager Bryan Whalen stressed that the fund had no trouble selling securities to raise cash for investors who wanted out. Under Gundlach, the TCW Total Return Bond fund had invested almost exclusively in mortgage-backed bonds, and there had been some concern on Wall Street early in the week about the liquidity of those securities if large numbers had to be sold.

Whalen said the fund was able to sell even non-government-guaranteed mortgage bonds "right at the market," meaning the value at which they were carried on the fund's books. "Dealers were fighting amongst each other to get those bonds," Whalen said.

--- Rivelle and his team have maintained the asset composition of TCW Total Return Bond where Gundlach left it -- with about two-thirds of the portfolio in government-guaranteed mortgage bonds ("agency" securities) and one-third in non-guaranteed mortgage bonds. Whalen said he was "very comfortable" with that mix in terms of the portfolio's future performance.

--- The merger of TCW Group with Rivelle's L.A. firm, Metropolitan West Asset Management -- a deal engineered by TCW to fill the gap left by Gundlach and the subsequent departure of many of his deputies -- won't result in mergers of individual TCW and Metropolitan West mutual funds. Rivelle answered a "categorical no" to a conference call question of whether the TCW Total Return Bond fund would be combined with the Met West Total Return Bond fund.

--- Rivelle didn't say how many of Gundlach's mortgage-bond lieutenants had left (the total is believed to be about 15), but he said that the infrastructure TCW had built up to research and track the often complex securities was "virtually entirely intact."

--- Although Met West is known more as a manager of diversified bond portfolios, including corporate and government bonds, Rivelle noted that mortgage securities accounted for about two-thirds of the Met West Total Return fund's $7.4 billion in assets. Trying to soothe investors' concerns about replacing Gundlach's level of experience with mortgage issues, Rivelle said that TCW and Met West both were "value-oriented" investors that focus on individual bond analysis.

-- Tom Petruno 

Photo: Tad Rivelle. Credit: Metropolitan West Asset Management