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Amid legal battle with TCW, DoubleLine seeks to launch mutual funds

January 12, 2010 |  1:23 pm

DoubleLine Capital, formed by star bond fund manager Jeffrey Gundlach after he was fired by L.A. money management firm TCW Group last month, today registered to launch its first three mutual funds for individual investors.

Gundlach, who is in a vicious legal battle with TCW, is hoping to lure investors away from the TCW funds he had managed for the last decade -- including TCW Total Return Bond, the firm’s flagship retail fund.

In a filing with the Securities and Exchange Commission, DoubleLine applied to launch its own Total Return Bond fund, which like the TCW Total Return Bond fund would invest primarily in mortgage-backed bonds, Gundlach’s specialty.

The firm also said it planned to launch the DoubleLine Core Fixed Income fund, which would invest in a diversified mix of bonds; and the DoubleLine Emerging Markets Income fund, which would mostly own bonds of companies, financial institutions and governments of emerging-market countries.

DoubleLine plans to sell the funds directly to investors without a sales charge. The minimum investment would be $2,000, or $500 for retirement accounts. The base annual management fees would be about 0.4% of assets for the Total Return and Core Fixed Income funds, and 0.75% for the emerging-markets fund.

Gundlach, 50, had been TCW’s chief investment officer until the firm fired him on Dec. 4, saying he had threatened to leave the company and take his team with him. On the same day, TCW said it bought Metropolitan West Asset Management to take over management of its bond funds.

Within 10 days Gundlach had formed DoubleLine; about 40 of his 65 fixed-income staffers at TCW have since defected to DoubleLine.

Last week TCW sued Gundlach, alleging that he and other TCW defectors had been plotting for months to steal the firm’s proprietary information and use it to form a rival company. Gundlach has accused TCW of using a “scorched earth legal policy” in its suit.

In its filing today with the SEC, DoubleLine says it “believes that it has meritorious defenses to [TCW’s] allegations, though there can be no assurances with respect to the outcome of the litigation.”

-- Tom Petruno