DoubleLine CEO and CIO Jeffrey Gundlach says the fund family’s Total Return Bond Fund (DLTNX) could close to new investors in 2015.
“It’s been at around $40 billion … for quite a while,” he said during a webinar on Tuesday. “A lot of people are ambulance chasing, but we are not interested in asset bloat. We like to grow in a controlled way. It has further capacity, but we could close it in 2015. And there’s a greater than 50% probability that we will. Not in the first quarter, but we are serious about capacity constraints.”
The DoubleLine Total Return Bond Fund was launched in April 2010. For the 12 months ending Oct. 31, its retail-investor shares improved 4.98% vs 2.73% for the Barclays U.S. Aggregate Index, which tracks bonds.
In contrast to PIMCO Total Return’s outflows, the DoubleLine Total Return Fund had net inflows of about $804 million in November, according to Morningstar. DoubleLine says its inflows were close to $820 million.
In general, Gundlach says, investors can buy and hold DoubleLine funds. “If the Fed raises rates, bonds should do better – not worse – as is happening already. If you are really worried about a long-term rise in interest rates – and we are not – you should move into our flexible, low duration bond fund,” he noted.
The fixed-income specialist says investors benefit from being in dollar-denominated holdings right now.
“The dollar is smoking hot, and the U.S. could raise rates, so it would strengthen vs. virtually all other currencies,” he said.
While the U.S. economy and currency remain strong, many other parts of the world are facing big challenges, and commodity prices continue to drop. “We could end up importing some deflationary aspects of the world economy and that could come at the price of U.S. growth,” Gundlach explained.
For these and several other reasons, he says, the Federal Reserve’s push for raising rates is worth questioning.
“We have no fundamental reason to combat inflation looking at the [past] five-year period,” Gundlach said. “This is not a recipe for fundamental Fed tightening. Commodities are where they were at the depth of the malaise of the global economy in 2010. They did rise earlier this year. But now the dollar is stronger, and they have collapsed.”
As for gold, it’s had a good year after a dismal 2013 and has done better than currencies like the yen and the euro. “And with trouble in the EU brewing, it’s [playing out] in precious metals,” he said.
Describing geopolitical risks such as unrest in Greece and the weakening price of oil, he said, “The tell-tale signs are building for [turmoil in] the global economy. Oil is crashing, and other commodities are, too … Junk bonds peaked two-months ago, German yields are negative.”
Elsewhere, “Japan is off to the races with further devaluation. It looks like the start, to put it harshly, of a currency war,” Gundlach explained.
As for how such risks could affect the bond market, “Yields do not want to go up,” he said. “I’ve said that if oil goes to $40 [per barrel], the yield on the 10-year Treasury is going to 1%.”
Gundlach acknowledged that he’s “not sure” where oil prices will bottom out, but he seems more sure on what will happen if they continues to fall at a dramatic pace: “I hope it is not going to $40 … because the global geopolitical consequences could be terrifying … If the 10-year Treasury yield gets to 1% with oil at $40 per barrel, all hell breaks loose.”
— Related on ThinkAdvisor: Gundlach: Fed Might Raise Rates ‘Just to See What Happens’