March 30, 2012

How Are Guns N’ Roses and TCW Fund the Same? Reformed Broker Has Answer

Joshua Brown slaps both Axl Rose and TGLMX for trying to cash in on their old teams’ success

Guns N’ Roses guitarist DJ Ashba (left) and Axl Rose perform in London's O2 Arena, Oct. 13, 2010. (Photo: AP) Guns N’ Roses guitarist DJ Ashba (left) and Axl Rose perform in London's O2 Arena, Oct. 13, 2010. (Photo: AP)

Downtown Josh Brown, the financial Twitterati's favorite Reformed Broker, is at it again, stirring up trouble this time by comparing TCW Total Return Bond Fund CIO Tad Rivelle’s attempt to revive the fund with Axl Rose’s sad attempt to breathe new life into his old Guns n’ Roses band.

The problem, says Brown in a March 27 blog post, is that Rivelle and Rose both faced the unenviable task of launching a convincing comeback without the talent that had made them successful in the first place.

For Rose, that meant recording a $13 million album that flopped because new band members brought in to replace Izzy Stradlin, the co-writer of such hits as Sweet Child O’ Mine and Paradise City, just couldn’t come up with the creative goods. And for TCW, that meant “lying by omission” when management didn’t come clean about how the Lipper award-winning fund’s stellar results were actually generated by Jeffrey Gundlach and his team, about 30 of whom departed TCW in December 2009 and went off to form DoubleLine (with lawsuits to follow).

The reason for his blog post, Brown says, is that he’s simply pointing out a dimension of performance research that often gets overlooked by investors who are “chasing the hot dot.”

“I’m sure that Tad Rivelle, CIO of the TCW Total Return Bond Fund (TGLMX), is a nice and handsome man,” Brown writes. “I’m also sure that he is smart and doing his very best at the helm of the fund. But in my view, he has no business making the following statement in a press release about his fund’s performance:

Less traditional fixed income asset classes have delivered strong returns for long-term investors and our outstanding track record in the areas of mortgage-backed securities and emerging markets is reflected in these awards.”

Rivelle and his team had almost nothing to do with delivering these strong returns to the long-term investors in TCW Total Return Bond, Brown says: “While band names and fund families may keep the same names, finding out if there are different players behind the scenes can mean a very different final outcome.”

Read more about Reformed Broker Josh Brown at AdvisorOne.

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