Jeffrey Gundlach, manager of the top-performing DoubleLine Total Return Bond Fund, raised $2.3 billion for a closed-end bond fund in an initial public offering that ranks among the five biggest in the industry.
DoubleLine Income Solutions Fund, which started trading today under the ticker symbol DSL, ranks fifth among all closed-end funds, compared with the Eaton Vance Tax-Managed Global Diversified Equity Income Fund, which raised $5.5 billion for the No. 1 spot in 2007, according to Cecilia Gondor, chief investment officer at Miami-based Thomas J. Herzfeld Advisors Inc. The DoubleLine fund seeks high current income and will invest at least 80 percent of net assets in debt securities globally, according to a statement today from Los Angeles-based DoubleLine.
DoubleLine Income Solutions Fund will be managed by Gundlach, corporate-bond manager Bonnie Baha and Luz Padilla, who oversees emerging-market debt. It intends to use leverage, or the use of borrowed money to amplify returns, through reverse repurchase agreements, loans or lines of credit from banks. Leverage may represent about one third of the fund’s total assets, according to the statement.
“The interesting thing about the DoubleLine fund is the broad flexibility built into the investment strategy,” Gondor said in a telephone interview. “That’s going to be key going forward in a changing future market environment and gives them an edge in having that flexibility to go where they feel the opportunities are.”
Gundlach manages the $40.7 billion DoubleLine Total Return Bond Fund, which has advanced 11.4 percent in the past three years to beat 99 percent of peers, according to data compiled by Bloomberg.
In January, Pacific Investment Management Co. started a closed-end bond fund called Pimco Dynamic Credit Income Fund, which had the third-highest amount of money raised in a closed-end fund IPO with $3.3 billion, Gondor said. The fund offers a dividend yield of 7.6 percent, according to Pimco’s website.
Closed-end funds sell a fixed amount of shares to raise money for investments and then trade on an exchange like stocks. They can trade at a price that’s higher or lower than the value of their underlying holdings. Many closed-end funds use leverage to boost payouts. Leverage allows the funds to take advantage of low interest rates and borrow relatively cheaply while investing at long-term rates that are higher.