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Jeffrey Gundlach to launch new investment firm

The star bond fund manager fired by L.A. money manager TCW Group this month will partner with Oaktree Capital Management, a group of former TCW executives.

December 15, 2009|By Tom Petruno

Ousted by Los Angles financial giant TCW Group, star bond fund manager Jeffrey Gundlach on Monday turned to a firm whose executives had their own bitter breakup with TCW nearly 15 years ago.

Gundlach said that he was launching an investment firm called DoubleLine with help from Oaktree Capital Management, a major global investor in bonds and private equity.

L.A.-based Oaktree was formed by Howard Marks, Bruce Karsh and a handful of other TCW money managers in 1995, in a move that TCW founder Robert Day at the time branded as "disloyal at the very least."

Oaktree now manages about $67 billion for big investors. Marks said the firm would provide advice and back-office support for DoubleLine and take a minority equity stake in the firm.

Marks said he expected DoubleLine to become "a very successful money management firm," and that Oaktree's deal with Gundlach "may lead to joint product offerings."

Gundlach last week vowed to get a fresh start in the asset-management field and hoped to lure away many of his former TCW clients. He said Monday that more than 30 of his former team members in the bond business at TCW had left to join him at DoubleLine.

In a move that stunned the money management world, TCW Chief Executive Marc Stern on Dec. 4 said Gundlach was "relieved of his duties."

The firm, which manages about $110 billion in assets, said it acted because Gundlach had "threatened to leave TCW and take key personnel with him."

TCW simultaneously agreed to buy Metropolitan West Asset Management, a West L.A.-based firm that manages about $30 billion in bonds, to take over Gundlach's bond portfolios.

Gundlach, 50, has denied giving TCW an ultimatum but has acknowledged that he had grown frustrated with the firm's direction and had had informal discussions this year with other money management companies.

Gundlach, who had been at TCW for 24 years and was named chief investment officer in 2005, is well known on Wall Street for his expertise in mortgage-backed securities.

Under his management the TCW Total Return Bond mutual fund outperformed nearly all of its rivals over the last 10 years, gaining an average of 7.7% a year.

Investment research firm Morningstar Inc. last month named Gundlach a finalist for "fixed-income fund manager of the decade," on a list that included bond guru Bill Gross of the Pimco funds.

Besides managing portfolios for institutional clients, Gundlach said, DoubleLine expects to eventually launch its own line of mutual funds for small investors and also could contract with established funds looking to outsource some portfolio management duties.

Wall Street has been eager to see whether Gundlach can quickly partner with other firms to jump back into the asset-management business.

Michael Rosen, a pension consultant who heads Angeles Investment Advisors, said Oaktree's support would help boost DoubleLine's image with potential investors. "It's obviously a very credible and established firm," he said.

Oaktree's Marks and Karsh worked with Gundlach at TCW before they left in 1995, and Karsh said he had remained in "close contact" since then with one of Gundlach's top deputies, Philip Barach, who also has joined DoubleLine.

Gundlach said a banker friend suggested that he contact Oaktree.

The two sides met last week to work out details of the alliance, he said.

Gundlach, a longtime art collector, said he chose the name DoubleLine in part as a reference to the painting style of one of his favorite artists, Piet Mondrian, and for the message of double lines on the road -- meaning "You don't cross the double line of risk." One of his investment tenets is the need to closely monitor risk to avoid the chance of debilitating losses, he said.

Asked about Gundlach's new firm, a spokeswoman for TCW said it expected Gundlach and DoubleLine to "respect their obligations and not use any of TCW's proprietary information or platforms."

Gundlach said that any TCW information that had been on the private computers of former TCW employees now at DoubleLine had since been given back to the company.

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