Doubleline CEFs - DSL vs. DBL

BWG

The mandates for both DSL and DBL seem to be 'go anywhere' yet the portfolio compositions of the two funds are very different. DSL seems to emphasize corporate bonds while DBL emphasizes mortgage debt. Would appreciate any insight on why the portfolios are so different.

I have appended below information about both funds from the Doubleline website:

DBL

Investment Objective
The Fund’s investment objective is to seek high total investment return by providing a high level of current income and the potential for capital appreciation. The Fund cannot assure you that it will achieve its investment objective.

Philosophy
The Fund may invest in debt securities and income-producing investments of any kind, including, without limitation, residential and commercial mortgage-backed securities, asset-backed securitites, U.S Government securities, corporate debt, international sovereign debt, and short-term investments. The Fund’s investment adviser, DoubleLine Capital LP allocated the Fund’s assets among market sectors, and among investments within those sectors, in an attempt to construct a portfolio providing a high level of current income and the potential for capital appreciation consistent with what DoubleLine considers an appropriate level of risk in light of market conditions prevailing at the time.

DSL

Investment Objective
The Fund's investment objective is to provide a high level of current income and its secondary objective is to seek capital appreciation.

Philosophy
The Fund will seek to achieve its investment objectives by investing in a portfolio of investments selected for their potential to provide high current income, growth of capital, or both. The Fund may invest in debt securities and other income-producing investments anywhere in the world, including in emerging markets. The Fund's investment adviser, DoubleLine Capital LP ("DoubleLine" or the "Adviser"), allocates the Fund's assets among debt security market sectors, and among investments within those sectors, in an attempt to construct a portfolio providing the potential for a high level of current income and for capital appreciation consistent with what DoubleLine considers an appropriate level of risk in light of market conditions prevailing at the time.

ET91

on sep 16, Gundlach had a webcast about DSL and DBL at doublelinefunds.com. Did you listen to it? Might have answer you are looking for.

BWG

Thanks. The webcast transcript highlights the differences in the portfolios of the two funds much more precisely, but the reasoning is still not entirely clear. The scope of DSL seems to be more global/emergings mkts oriented but both seem to be go anywhere. The transcript for the webcast is here:
http://doublelinefunds.com/pdf/3-25-14_Webcast_Recap.pdf

ET91 said:

on sep 16, Gundlach had a webcast about DSL and DBL at doublelinefunds.com. Did you listen to it? Might have answer you are looking for.

fundalarm

@BWG: why would the portfolios NOT be different? why would a company print clone funds right one after another? just like pimco's PDI and PCI are different so are DBL and DSL.

Ted

@BWG: Difference in the two funds:
Cash Position:
DSl: Less Than 1%
DBL: 20% (18% long-2% short)
Number of Bonds;
DSL 90%
DBL 99%
Regards,
Ted

fundalarm

you are histerical, Ted.

DBL: 99% MBS and agency CMO, i.e. it's a mortgage fund
DSL: 17% MBS and agency CMO; 5% CMBS; 46% corporate non-US (including EMD); 16% corporate US, i.e. it's a diversified fixed income vehicle.

Ted said:

@BWG: Difference in the two funds:
Cash Position:
DSl: Less Than 1%
DBL: 20% (18% long-2% short)
Number of Bonds;
DSL 90%
DBL 99%
Regards,
Ted

BWG

My point exactly. The portfolio composition of DSL and DBL are very different even though the stated fund objectives are very similar and they are run by the same manager. What gives? At least for PDI and PCI, the differences in portfolio strategy can be explained by the differences in the management teams for the two funds.

As an aside, one sees a much lower discount for DBL vs DSL. Could be explained by the fact that Gundlach's expertise is greater in the mortgage bond space.

I am long DSL. Better price and NAV performance than DBL and greater discount to NAV. The nagging question is how much of that outperformance is due to greater risk (vs. DBL).

fundalarm said:

you are histerical, Ted.

DBL: 99% MBS and agency CMO, i.e. it's a mortgage fund
DSL: 17% MBS and agency CMO; 5% CMBS; 46% corporate non-US (including EMD); 16% corporate US, i.e. it's a diversified fixed income vehicle.

fundalarm

if the fixed income fund's objective is current income -- then you pretty much covered ALL fixed income funds. trust me i know... i read (if not write) these for a living. for the equity fund, an investment objective would be capital appreciation. just like large cap equity could be anything in the world, so could be unconstrained bond funds or any other fixed income vehicles. DBL is a mortgage fund -- that's doubleline's primary expertise. its discount is less than that of DSL because.... wait for it... it IPO'd earlier -- in the go-go pre-2013 fed taper tantrum. so it had physically more time to develop better pricing. this is very similar to PDI (an ivascyn mortgage fund) vs PCI. the latter is more diversified (currently also with ivascyn) and IPO'd AFTER PDI, i.e. less time to develop decent pricing.

for full disclosure, i own a decent chunk of PDI, smaller one of DSL, and a tiny bit (picked up in the latest swoon) of PCI.

The only funds that should be similar to identical are those that not only managed by the same PMs, but have identical names, such as Pimco Income, Pimco Income I, Pimco Income II, etc.

Hope this clears your confusion.

BWG

Thanks for the explanation and clarification. Much appreciated.

fundalarm said:

if the fixed income fund's objective is current income -- then you pretty much covered ALL fixed income funds. trust me i know... i read (if not write) these for a living. for the equity fund, an investment objective would be capital appreciation. just like large cap equity could be anything in the world, so could be unconstrained bond funds or any other fixed income vehicles. DBL is a mortgage fund -- that's doubleline's primary expertise. its discount is less than that of DSL because.... wait for it... it IPO'd earlier -- in the go-go pre-2013 fed taper tantrum. so it had physically more time to develop better pricing. this is very similar to PDI (an ivascyn mortgage fund) vs PCI. the latter is more diversified (currently also with ivascyn) and IPO'd AFTER PDI, i.e. less time to develop decent pricing.

for full disclosure, i own a decent chunk of PDI, smaller one of DSL, and a tiny bit (picked up in the latest swoon) of PCI.

The only funds that should be similar to identical are those that not only managed by the same PMs, but have identical names, such as Pimco Income, Pimco Income I, Pimco Income II, etc.

Hope this clears your confusion.