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TCW clients pulled $25 billion after firm fired star bond manager Jeffrey Gundlach

February 24, 2010 |  2:40 pm

L.A. money manager TCW Group Inc.’s ouster of its star bond fund manager in December cost the firm more than one-fifth of its assets, the company disclosed Wednesday.

Institutional and individual investors pulled a total of about $25 billion from TCW after the company terminated Jeffrey Gundlach as chief investment officer on Dec. 4, according to TCW data.

The company managed $115 billion as of Jan. 31, up from $110 billion on Dec. 4. But about $31 billion of the $115 billion was brought in by Metropolitan West Asset Management, which TCW agreed to buy to replace Gundlach and more than 40 TCW staffers who left with him.

Tcw logo So TCW’s assets alone declined to about $84 billion by Jan. 31. Any drop in assets means a money manager loses income because management fees are charged as a percentage of assets.

Of the $25 billion in cash that left TCW, more than $6 billion came out of the TCW Total Return Bond fund, the company’s flagship mutual fund.

TCW, which has said it expected to lose some assets after Gundlach’s dismissal, disclosed the Jan. 31 figures in a statement announcing that it had completed its merger with Metropolitan West. “The strategic acquisition of MetWest provides TCW with a strong investment platform to meet the needs of our clients and further enhance its long-term growth potential,” TCW Chief Executive Marc Stern said in the statement.

The bulk of TCW’s assets has long been in high-quality bonds, which Gundlach oversaw. Some investors who had had their fixed-income assets managed by Gundlach -- a 24-year veteran of TCW who built a strong track record with mortgage-backed bonds in particular -- quickly yanked their money after he left.

Gundlach The list of investors who’ve departed TCW includes the Kansas Public Employees Retirement System, the Texas Municipal Retirement System and the Colorado Public Employees Retirement Assn.

TCW has suffered additional client defections since Jan. 31. Investors holding about $1.3 billion in specialized mortgage funds at the firm decided last week to pull their money, although TCW was able to retain about $1.7 billion in those funds.

But most of the cash that has left TCW hasn’t followed Gundlach to his new firm, DoubleLine Capital, which he formed within days of his ouster from TCW. Gundlach says DoubleLine is managing about $3 billion, most of which is from insurance companies and high-net-worth individuals, he said.

Gundlach is seeking Securities and Exchange Commission approval to launch mutual funds, hoping to pick up some of the investors who’ve left the TCW Total Return Bond fund.

TCW and Gundlach are embroiled in a bitter legal battle. TCW last month sued Gundlach and several other ex-TCW employees, alleging that they set up DoubleLine using “vast quantities” of proprietary information they stole from TCW. Gundlach has since countersued, accusing TCW of firing him to avoid honoring an agreement to share up to $1.25 billion in potential fee income.

-- Tom Petruno

Photo: Jeffrey Gundlach. Credit: Alex Gallardo / Los Angeles Times