This is Jeffrey Gundlach’s first appearance on the IA 25. Click here to view the complete list and Special Report schedule for extended profiles for each of the 2013 IA 25 honorees.
For the few people in the advisor industry who haven’t heard of Jeffrey Gundlach, the story goes something like this: After an abrupt 2009 departure from TCW Group, where he headed a fixed-income group worth more than half of the firm’s $110 billion in assets under management, Gundlach and 40 or so loyalists started up their own firm, DoubleLine Capital, in the face of a lawsuit charging him with misappropriating TCW trade secrets.
Gundlach suffered dark days, accusations flew, and he held the fate of dozens of people in his hands.
But they pressed on through the wilderness and kept their plucky startup going until the clouds parted, the lawsuit was settled in Gundlach’s favor, DoubleLine surpassed $50 billion in assets under management, and their flagship DoubleLine Total Return Fund (DLTNX) clocked in within three years as the best-performing bond fund in Morningstar’s universe of 300 intermediate-term fixed-income funds.
Today, Gundlach is described in the business media as “a legendary investment manager,” “a Wall Street savant” (even though he’s Los Angeles-based), “the king of bonds,” “a bond guru” and “a bond god.” Not bad for a guy who was sued for breach of fiduciary duty and illegal interference with clients just three weeks after DoubleLine’s founding on Dec. 14, 2009.
“We have the most popular fund in America,” he explained, with a charming lack of modesty. “People want to know about DoubleLine more than they should, maybe, but it’s won us a lot of attention. Being No. 1 is difficult on the competition, and they embark on negative campaigning. That goes with the territory. When fund of funds people talk to my competitors, my competitors want to talk about DoubleLine.”
Gundlach, meanwhile, is more interested in talking about the recent launch of his firm’s first stock fund, the DoubleLine Equities Small-Cap Growth Fund (DLESX), and the success of some pair trades he has recommended over the last year.
Back in May 2012, Gundlach said, he shorted Apple Corp. stock and went long natural gas. Sure enough, he said, tapping on various computer keyboards as he talked, that pair trade is now at 125%. Meanwhile, he noted, his “go long the Nikkei and short the Japanese yen” trade from December went up 65%. Now, he’s looking at going long Spanish stocks on the IBEX and shorting U.S. stocks.
“I look for pair trades where the risk-reward is dramatically skewed with ridiculous pricings,” Gundlach said, then gave a further glimpse into how his mind works: “Pair trades are interesting because you don’t have to have a definitive view. You just have to understand that things will keep happening due to policy manipulations. The whole world is a slave to the central planners.”
Like Warren Buffett, Gundlach said, he has unceasing faith in the obvious.
“People like my speeches because, they say, ‘You make it seem so obvious, and I can’t think of anything wrong with what you’re saying.’ Then they go back to their offices and watch CNBC and read The Wall Street Journal and go right back to what they were thinking before they heard me.”
While it’s impossible to train people to think the way he does, Gundlach said, his DoubleLine colleagues are a happy bunch.
“No one ever leaves. It’s not like a revolving door. We like working together,” he said. “Basically, 45 people showed up at my door saying, ‘We want to continue to work with you. We’ll do whatever you want to do,’ so I started a company. I felt a responsibility to these people, and it’s fun.”