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Gundlach’s Total Return Fund Lures $10 Billion in 16 Months

DoubleLine Total Return Bond Fund founder Jeffrey Gundlach
DoubleLine Total Return Bond Fund founder Jeffrey Gundlach. Photographer: Jonathan Alcorn/Bloomberg

DoubleLine Total Return Bond Fund, started by Jeffrey Gundlach after he was dismissed from TCW Group Inc., set a record for fastest-growing actively managed mutual fund by attracting $10 billion in assets in 16 months as it posted top returns.

The fund has pulled in more than $1 billion in investor deposits in August, a record month, Ron Redell, president of Los Angeles-based DoubleLine Capital LP’s mutual-fund unit, said today in an interview. The fund, managed by Gundlach and Philip Barach, returned 12 percent in the past year, beating 99 percent of rivals, according to data compiled by Bloomberg.

“I don’t know of anybody who has started a new firm and been able to raise this kind of money,” Geoff Bobroff, an independent fund consultant in East Greenwich, Rhode Island, said today in an interview. “To go from zero to $10 billion is pretty remarkable.”

Gundlach, who was named Morningstar Inc.’s fixed-income manager of the year in 2006, started DoubleLine in December 2009 after he was fired as chief investment officer of TCW over a dispute that led to a legal battle. Gundlach co-managed the TCW Total Return Bond Fund with Barach, who subsequently joined DoubleLine as president. The TCW fund, whose assets have declined to about $5.3 billion from almost $12 billion before Gundlach left, advanced 6 percent in the year through yesterday.

Pimco, JP Morgan

The rapid rise of Gundlach’s debut fund surpassed that of fast-growing funds opened by seasoned rivals such as Pacific Investment Management Co. The $18 billion Pimco Unconstrained Bond Fund, started by the Newport Beach, California-based Pimco in June 2008, took two years to get to the $10 billion mark, according to data compiled by Bloomberg. The $14 billion JPMorgan Strategic Income Opportunities Fund reached the $10 billion mark in slightly less than two years after its October 2008 inception, Bloomberg data show.

“Investors see our funds as the lighthouse in the storm amid the recent market volatility,” Redell said.

Investors poured a net $1.4 billion into the four DoubleLine mutual funds in August, Redell said. Including hedge funds and separately managed accounts, DoubleLine manages $15 billion in assets.

TCW, based in Los Angeles, sued Gundlach, 51, in January 2010, after more than half of its fixed-income professionals joined his firm. TCW seeks $375 million in damages, claiming Gundlach stole trade secrets, including client portfolio data, to start DoubleLine.

Legal Dispute

Gundlach, who had worked at TCW for 25 years, countersued, saying TCW fired him to avoid having to pay management and performance fees for the distressed-asset funds his group managed. Gundlach seeks about $500 million.

TCW today rested its case in the trial, while DoubleLine called its first witness.

TCW hired an investment team from Metropolitan West Asset Management to replace Gundlach in 2009. The TCW Total Return fund advanced 8.9 percent in the past five years, beating 99 percent of peers, Bloomberg data show. The fund lagged behind 75 percent of rivals this year through yesterday.

The firm managed $119.5 billion in assets, including about $31 billion in its mutual funds.

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