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Hard Choices

Jeffrey Gundlach on Starting DoubleLine

Until Dec. 4, 2009, when I was ambushed and fired, I had planned on staying at TCW Group (TSI), where I had worked for 24 years. I had been working, working, working all that fall, investing $78 billion in a very fluid market. I was the golden goose. Instead, they shoved a complaint in my hand. To this day, I don’t know what it said, but it was clear to me that they wanted me to disappear. They offered me nothing; they wouldn’t even let me go back into my office. I had to walk down 17 flights with the general counsel following me. I had no clarity on what I was going to do.

The next day, 10 of my senior guys came to see me and said, “Whatever you do, we want to do it with you.” Within 48 hours, I got a call from an investment banker who said Oaktree [Capital Management] might be interested in helping me start my own firm. We started DoubleLine Capital on Dec. 14. Almost all of my team came over, about 45 people. I was sure we would have $10-$15 billion of assets under management within six weeks. Instead, we only had about $1.8 billion. That represented about $4 million in annual revenue; my overhead was $30 million a year! I underestimated how hard it would be to get a fund off the ground.

One reason, obviously, was that TCW threw a lawsuit at me, accusing me of stealing data. We had about 20 clients who had committed to come over, representing up to $50 million in fees. After TCW filed its suit, they backed out. I remember telling one of them, “Thanks for all your support over the years, and I’m sorry you’re incapable of making the right decision.”

I was scrambling. I felt abandoned. But I won my countersuit [for $67 million in lost compensation]. Little things gave me faith. I remember doing the New York Times crossword one Friday in March. I kept stumbling on a three-letter word for “significant hit.” “RBI” didn’t work. Then I realized it was “DBL”—a double. At that moment, I felt DoubleLine would do O.K.

Early on, some on our team suggested we downsize. I said, “Absolutely not.” I was willing to carry an oversized team because I thought we could grow into it. Investors would come if we got results. And they did. We now have $17 billion under management. No one can say we didn’t win. — As told to Diane Brady          

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