Jeffrey Gundlach’s $20.9 billion DoubleLine Total Return Bond Fund, which outperformed 99 percent of rivals last year, attracted more money than any other U.S. mutual fund in February.
Gundlach’s fund, which invests in mortgages, pulled in a net $2.43 billion, according to data from Chicago-based Morningstar Inc. Five index funds managed by Vanguard Group Inc. ranked among the month’s 10 best-selling funds.
“Most investors loaded up on credit last year and underweighted U.S. government bonds,” Gundlach said today in a telephone interview, explaining his 2011 performance. “We did the opposite.”
Gundlach’s flagship fund has grown rapidly since it was created by Los Angeles-based DoubleLine Capital LP in April 2010, four months after he was ousted as investment chief at TCW Group Inc., which is also based in Los Angeles. The fund has quadrupled in size over the past year, driven by investment gains and rising contributions from investors.
“Gundlach did well last year when other fixed-income managers stumbled,” Geoff Bobroff, a mutual fund consultant in East Greenwich, Rhode Island, said in a phone interview. “The halo continues to follow him.”
DoubleLine Total Return gained 2.7 percent this year through yesterday, beating 96 percent of competitors, according to data compiled by Bloomberg. Last year the fund returned 9.5 percent.
The $54.7 billion Vanguard Total Bond Market II Index Fund won $2.07 billion in deposits in February, second-most among U.S. mutual funds, Morningstar data show. The $164 billion Vanguard Total Stock Market Index Fund ranked third in new cash with $1.3 billion.
Appetite for Indexing
“Investors continue to have a healthy appetite for index products,” John Woerth, a spokesman for Valley Forge, Pennsylvania-based Vanguard Group, said in an e-mail.
Vanguard attracted $5.66 billion to its U.S exchange-traded funds in February, more than any competitor, according to Boston-based State Street Corp. Of the $1.8 trillion Vanguard manages, about 58 percent is in index products, a mix of mutual funds and ETFs, Woerth said. Most ETFs track indexes and trade throughout the day like stocks.
Several high-profile bond managers failed to keep pace with their peers in 2011 as investors looking for safety piled into U.S. Treasuries. Bill Gross’s $252 billion Pimco Total Return Fund, the world’s biggest mutual fund, returned 4.2 percent last year, trailing 69 percent of rivals, according to data compiled by Bloomberg. The $21 billion Loomis Sayles Bond Fund, run by Dan Fuss, gained 3.8 percent, worse than 68 percent of similar funds.
Gundlach, 52, bought long-duration mortgage-backed securities last year that performed much like Treasuries, he said. Treasuries returned 9.8 percent in 2011, according to the Bank of America Merrill Lynch U.S. Treasury Master Index.
Investors have noticed Gundlach’s record. Over the past six months his largest fund won more than $9 billion in deposits; investors pulled more than $600 million from Gross’s fund over the same stretch, Morningstar data show.
DoubleLine Total Return’s gains this year have come mainly from its investments in non-agency mortgage-backed securities, Gundlach said. Pimco Total Return is up 2.9 percent in 2012; Loomis Sayles Bond has returned 6.3 percent.
DoubleLine Capital LP has amassed about $29 billion in assets in a blend of mutual funds, separate accounts and hedge funds. Gundlach, chief executive officer of the firm, said with existing personnel DoubleLine could manage as much as $50 billion.
“At some point we will have to decide if that is our limit,” Gundlach said. “Eventually we could reach a point where we may have to think about shutting down some strategies.”