The bond fund manager, who has outperformed Bill Gross's Pimco Total Return Fund over the last 10 years, was replaced in a surprise move on Dec. 5
By Christopher Condon and Sree Vidya Bhaktavatsalam
(Bloomberg) — TCW Group (TGLMX), the Los Angeles-based money manager overseeing $110 billion, fired Chief Investment Officer Jeffrey E. Gundlach and replaced him as fixed-income head with the co-founder of a bond firm it acquired.
Gundlach, 50, whose bond fund outperformed Bill Gross's Pimco Total Return Fund (PTTRX)
over the last 10 years, was "relieved of his duties" and will be succeeded by Tad Rivelle, investment chief at Metropolitan West Asset Management LLC. TCW, which didn't disclose a purchase price, said in a statement yesterday that it "deeply regrets" having to take this action.
The sudden departure of a fund executive of Gundlach's stature is "exceedingly rare," Eric Jacobson, director of fixed-income research at Chicago-based Morningstar Inc., said in an interview. "In terms of surprises, I can't think of anything else to compare it to."
Societe Generale (GLE:FP), the French bank that owns TCW, has said it would consider taking the fund unit public and hired Citigroup Inc. in July to explore changes to the firm's ownership structure. Gundlach, who worked for TCW since 1985, held conversations earlier this year with rivals including Legg Mason Inc.'s Western Asset Management Co. and BlackRock Inc. about a role at those firms, according to people familiar with the talks. The conversations ended and no agreement was struck, the people said.
Gundlach's $11.9 billion Total Return Bond Fund has returned 22 percent this year, beating 95 percent of funds with a similar investment style, according to Bloomberg data. Over the past 10 years, it averaged 7.9 percent a year, topping the 7.7 percent annual return for Pacific Investment Management Co.'s Total Return Fund, managed by Gross, according to Morningstar Inc.
Gundlach couldn't be reached for comment. Erin Freeman, a TCW spokeswoman, declined to comment beyond the statement.
Gundlach was recently nominated, along with Gross, for Morningstar's fund-manager-of-the-decade award in the fixed- income category. He won the research firm's annual award in 1996.
"Any time an organization of their size loses its chief investment officer, it's a significant event," Geoff Bobroff, a fund consultant in East Greenwich, Rhode Island, said in an interview. He said the frank language in TCW's statement was "highly unusual."
"Normally a company would say he was leaving to pursue other interests," Bobroff said.
TCW said Rivelle will be head of high-grade fixed-income investing after the acquisition is completed in the first quarter of 2010, and that Michael Reilly has been named head of equities. The Metropolitan West acquisition will add $30 billion in assets and 115 employees, TCW said.
TCW was founded in 1971 by Robert Day. About two-thirds of its assets are in bonds and remainder in stocks and alternative investments such as hedge funds.
The firm was one of nine money managers selected in July to participate in the Treasury Department's Public-Private Investment Program. It matches private money with government capital and loans to fund the purchase of troubled securities from U.S. banks in an effort to help revive the economy.
To contact the reporters on this story: Christopher Condon in Boston at email@example.com; Sree Vidya Bhaktavatsalam in Boston at firstname.lastname@example.org.