Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
Star bond fund manager Jeffrey Gundlach was found liable Friday for breaching his fiduciary duty to his former employer, asset management giant TCW Group Inc., ... a Los Angeles jury found no harm to TCW in that breach and awarded the firm no financial compensation.
Further, the jury found that TCW must pay $66.7 million to Gundlach and his three co-defendants for failure to pay wages owed them before leaving the money-management firm to set up a rival company in 2009.
On a separate issue, the jury of five women and seven men agreed with TCW’s claim that Gundlach had misappropriated the company’s trade secrets in setting up a rival firm in 2009, causing harm to TCW. Any damages on that claim will be decided by Judge Carl J. West. TCW is asking for $89 million.
The "pope" is touting the monetary award as vindication, but that is simply an award of wages due the people who were fired. The much bigger issue is the finding that the "pope" and his cohorts stole trade secrets and data when they left to form their own company. This is not at all surprising to me, since it would have been almost impossible for a startup company to be able to open for business and amass the kind of assets they did in such a short time and to have their data models and other trade technology running as quickly as they did without some kind of "papal" dispensation. We have not invested client money with this fund company, and, based on this finding, we will not invest client money with them. This is a huge deal, and I would hope that shareholders were voice their disapproval by leaving.
One must consider that the only moral/ethical option remaining in investing is to invest only in individual company stocks or bonds, where the individual has a full understanding of any moral, unethical or other personal considerations that could prohibit the investment.
How many factors might one weigh as to whether to invest in fund "A" or "B" or "X"?
I will not have the time to review either a video or written transcript of the TCW/Gundlach trial; nor be able to determine the skills of the attorneys in presentation of facts, or a determination based upon facts or testimony.
I did follow snippets of reports about reported data/client base info being obtained from TCW and other reported trial information. A most curious circumstance of this trial; is why TCW did not pursue the closure of DoubleLine? If former TCW employees and/or Gundlach himself indeed stole enough of whatever from TCW to cause great harm to their business; why would TCW not pursue a shutdown of the operations of DoubleLine? If Gundlach and team performed true criminal acts in the eyes of legalities against TCW, how are they allowed to remain in business? Is there another trial set for other charges? This circumstance, I do not understand.
I still do believe that "some" of this trial is/was involved with apparent personality clashes; and what the Japanese would consider a "face saving" event; both at individual and company levels.
However, this brings to question as to which fund houses one should avoid for moral and/or ethical reasons. If an investor knows (documented) or thinks that there was gross misconduct or fudiciary responsiblity with say, the large banks and/or investment houses with their use of piling a credit default swap upon another CDS to make a buck or two; should not an investor forgo any investments with a Goldman Sachs or JP Morgan (randomly selected and well-known banking center names without implying or presenting any given misconduct) or whomever else one finds to place upon their own list for whatever reason?
Our house has never been under the delusion that there are not thieves, panderers and those only looking out for their own benefit; within the larger investment community. Does one forgo investments, period; knowing it may bring forth some profits from the unknown shady dealings of others?
Almost everyone's investments are likely perverted from a moral or ethical standpoint.
Anyone have their own list of "will not invest with". Names given at your own legal peril.
Our house does have one very large organization, with which we will not invest. And there are more suitable choices from other vendors, for the funds they offer.
You will be selling your position in RNSIX based upon the outcome of the trial; and the implications? Or are you concerned that folks invested in any DoubleLine related funds are going to be pulling monies?
Gundlach et al. hired Oaktree Capital Management to do the setup work for DBL, in exchange for an equity stake. The article quotes Paul Deitch of Oaktree:
"DoubleLine’s people were far from ready to start an investment company when he first met with them the week after Gundlach was fired, Deitch said.
'We had a lot of work to do,” Deitch said, adding that Oaktree had 57 people, including eight project managers, working on DoubleLine. “It was the Number 1 project.' "
The story doesn't say that DBL didn't use TCW data and certainly doesn't absolve them of that liability, but the Oaktree hired hands were responsible for getting the company up and running so quickly.
Last point, & very interesting to me: If DBL is using TCW data/models, they're certainly doing a better job with them than the new TCW/MetWest team; the comparable DBL funds (core fixed income, total return) are crushing the TCW equivalents. Imho, it's worth remembering in the context of fund returns that Gundlach's team developed the models & are probably better able to work with them.
Reply to @catch22: As the days go by, the more disappointed I am that there were trade secrets stolen from TCW. RNSIX was a very small portion of the portfolio anyways. I don't think that people will pull money because most people today probably don't care about such things.
I'm certainly not running a socially responsible portfolio by any means with investments in Glencore and the Rothschilds, but this was a small holding and the whole thing is rather disappointing. So, wasn't making much difference and can just move to another fund.
For sure, we will likely never know the whole story of how DoubleLine came to be. But clearly there were ethical lapses, some of which seem pretty big (sneaking data out of the office in a person's underwear???!!!) and stupid. Are there problems with other fund groups? Of course there are, but for me it's a case of whether I can trust the company and the fund manager to do the right thing, both for the shareholder and for their company, in an ethical manner. If I cannot do that, or if something occurs to shatter that trust, I move on. Sometimes, just hearing a manger speak, or meeting a manger in person, can give you a hint as to the way they probably treat others. For some investors, it's not a big deal. For others, it is.
Have had the opportunity to listen to several of Gundlach's advisor calls. He's seemingly a pretty bright light in the bond business. While in agreement that the breach is important, so is paying people you've contracted with who bring in the assets/make the money for your company. As another person posted, he and his team are likely largely responsible for developing the models that delivered lots of assets and I assume profits to TCW. A recent article in Barron's indicated a clash of egos was involved with the (former?) TCW boss-man, both he and Gundlach coming off as dueling roosters. Imagine Gundlach is difficult to work with but his extreme confidence seems justified by his investment results. Much of the hand wringing over the ethics seems similar to peoples' attitudes about dirty oil production. If you want to use motorized machinery you get the dirty petroleum business. If you want to make $$$ in the markets you likewise put up with some dirt in the business. AFAIK these aren't 'nice people' without large egos, GS being a prime example.
Is this unusual? Why is Judge Carl J. West taking the ball in this game? Started out as a Jury trial. Is the Jury not involved in the TCW trade secrets damage proceedings? Seems like smoke and mirrors, or are they writing of a script for a soap opera?
Comments
Star bond fund manager Jeffrey Gundlach was found liable Friday for breaching his fiduciary duty to his former employer, asset management giant TCW Group Inc., ... a Los Angeles jury found no harm to TCW in that breach and awarded the firm no financial compensation.
Further, the jury found that TCW must pay $66.7 million to Gundlach and his three co-defendants for failure to pay wages owed them before leaving the money-management firm to set up a rival company in 2009.
On a separate issue, the jury of five women and seven men agreed with TCW’s claim that Gundlach had misappropriated the company’s trade secrets in setting up a rival firm in 2009, causing harm to TCW. Any damages on that claim will be decided by Judge Carl J. West. TCW is asking for $89 million.
Interesting, he is not a very likeable guy, but he sure knows how to run a good mutual fund.
And he encouraged his staff to refer to him as the Pope or the Godfather.
http://dealbreaker.com/2011/07/secretary-cleavage-played-pivotal-part-in-jeffrey-gundlachs-alleged-tcw-theft/
The CEOs of banks in banking crisis really broke their fiduciary duties. There are many examples of it.
As talented as Gundlack may be, I've decided that I will stay away from his funds.
One must consider that the only moral/ethical option remaining in investing is to invest only in individual company stocks or bonds, where the individual has a full understanding of any moral, unethical or other personal considerations that could prohibit the investment.
How many factors might one weigh as to whether to invest in fund "A" or "B" or "X"?
I will not have the time to review either a video or written transcript of the TCW/Gundlach trial; nor be able to determine the skills of the attorneys in presentation of facts, or a determination based upon facts or testimony.
I did follow snippets of reports about reported data/client base info being obtained from TCW and other reported trial information. A most curious circumstance of this trial; is why TCW did not pursue the closure of DoubleLine? If former TCW employees and/or Gundlach himself indeed stole enough of whatever from TCW to cause great harm to their business; why would TCW not pursue a shutdown of the operations of DoubleLine? If Gundlach and team performed true criminal acts in the eyes of legalities against TCW, how are they allowed to remain in business? Is there another trial set for other charges? This circumstance, I do not understand.
I still do believe that "some" of this trial is/was involved with apparent personality clashes; and what the Japanese would consider a "face saving" event; both at individual and company levels.
However, this brings to question as to which fund houses one should avoid for moral and/or ethical reasons. If an investor knows (documented) or thinks that there was gross misconduct or fudiciary responsiblity with say, the large banks and/or investment houses with their use of piling a credit default swap upon another CDS to make a buck or two; should not an investor forgo any investments with a Goldman Sachs or JP Morgan (randomly selected and well-known banking center names without implying or presenting any given misconduct) or whomever else one finds to place upon their own list for whatever reason?
Our house has never been under the delusion that there are not thieves, panderers and those only looking out for their own benefit; within the larger investment community. Does one forgo investments, period; knowing it may bring forth some profits from the unknown shady dealings of others?
Almost everyone's investments are likely perverted from a moral or ethical standpoint.
Anyone have their own list of "will not invest with". Names given at your own legal peril.
Our house does have one very large organization, with which we will not invest. And there are more suitable choices from other vendors, for the funds they offer.
Regards,
Catch
You will be selling your position in RNSIX based upon the outcome of the trial; and the implications? Or are you concerned that folks invested in any DoubleLine related funds are going to be pulling monies?
Regards,
Catch
http://www.bloomberg.com/news/2011-08-31/tcw-rests-case-in-trade-secrets-fees-lawsuit-trial-with-jeffreyy-gundlach.html
Gundlach et al. hired Oaktree Capital Management to do the setup work for DBL, in exchange for an equity stake. The article quotes Paul Deitch of Oaktree:
"DoubleLine’s people were far from ready to start an investment company when he first met with them the week after Gundlach was fired, Deitch said.
'We had a lot of work to do,” Deitch said, adding that Oaktree had 57 people, including eight project managers, working on DoubleLine. “It was the Number 1 project.' "
The story doesn't say that DBL didn't use TCW data and certainly doesn't absolve them of that liability, but the Oaktree hired hands were responsible for getting the company up and running so quickly.
Last point, & very interesting to me: If DBL is using TCW data/models, they're certainly doing a better job with them than the new TCW/MetWest team; the comparable DBL funds (core fixed income, total return) are crushing the TCW equivalents. Imho, it's worth remembering in the context of fund returns that Gundlach's team developed the models & are probably better able to work with them.
Archaic
I'm certainly not running a socially responsible portfolio by any means with investments in Glencore and the Rothschilds, but this was a small holding and the whole thing is rather disappointing. So, wasn't making much difference and can just move to another fund.
I always read everything you electronically pen, here.
No pending lawsuits, .............
Take care,
Catch
Why is Judge Carl J. West taking the ball in this game?
Started out as a Jury trial.
Is the Jury not involved in the TCW trade secrets damage proceedings?
Seems like smoke and mirrors, or are they writing of a script for a soap opera?