Baha Calling Gundlach ‘Jerk' Bolsters Standing
http://www.bloomberg.com/news/2012-05-09/baha-calling-gundlach-jerk-bolsters-standing.htmlBeing visible has paid off for Baha and Gundlach. The $2 billion DoubleLine Core Fixed Income Fund (DBLFX) she manages returned 11.5 percent in 2011 compared with 7.8 percent for the Barclays U.S. Aggregate Total Return Index, a benchmark for U.S. bonds. The fund returned 3.3 percent this year through May 7, compared with 1.7 percent for the benchmark, according to data compiled by Bloomberg.
Baha says she's successful partly because she's not afraid to make an unpopular call. She ordered TCW traders to sell any Lehman Brothers Holdings Inc. debt they owned, even at a loss, in the first week of September 2008, when the debt was valued at more than 90 cents on the dollar.
Lehman filed for bankruptcy on Sept. 15, 2008, plunging the value to the single digits. "People don't pay me to hope; they pay me to make an assessment," Baha says. "If you are managing risk by hoping that somebody is going to buy Lehman Brothers or whatever other bank is in trouble, you're not really doing your job."
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http://www.businessweek.com/articles/2012-05-10/jeffrey-gundlach-bond-savant
He dives into why he alone can trounce the competition in bond funds. "I can still do about 7 percent in a world of 2 percent," he says. "You stress-test your portfolio constantly. You think about it and analyze it to death. Other people don't know how. I wish I could teach it to somebody."
Since DoubleLine first took investor money in April 2010, it has amassed $34 billion in assets. Even as it quadrupled in size last year, DoubleLine's $22 billion Total Return Bond Fund (DBLTX) outperformed 99 percent of its rivals. The firm takes in $80 million to $100 million in new client dollars every day.
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Just after lunch on Friday, Dec. 4, 2009, Gundlach, then 50 and TCW’s chief investment officer, watched as the bond market closed on the East Coast. It had been a great year: His TCW Total Return Fund had posted more than double the average return of its peers. Morningstar (MORN) had nominated him Fixed Income Manager of the Decade, and he was on track, he says, to collect hundreds of millions in salary and bonuses over the next couple of years.
Gundlach headed upstairs for what he believed was an executive meeting. Instead, in the boardroom, he was met by TCW’s chief counsel and an attorney from Quinn Emanuel Urquhart & Sullivan. They presented him with a document alleging gross misconduct, including an attempt to steal staff and confidential client and trade information to launch his own rival firm. His 24 years with TCW were over, effective immediately. His BlackBerry was already disabled.
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Back at TCW’s trading floor, Chief Executive Officer Marc Stern informed Gundlach’s team that their boss was gone, and that TCW was acquiring rival Metropolitan West to plug the hole. The following morning, 15 senior members of Gundlach’s team repaired to his house. Gundlach’s then-wife, Nancy, made coffee. (That’s her, second from left, in the band photo at the beginning of this article.) Louis Lucido, a deputy at TCW, brought donuts.
By noon, 14 of the gang of 15 had resigned from TCW. The holdout was Philip Barach, co-manager of the TCW Total Return Fund. Surrounded by a circle of mutineers, Gundlach, who says he got misty-eyed, persuaded Barach to join them. The two men shook hands and hugged, and the reunited team applauded Barach as he thumbed out his own resignation on his BlackBerry. “It was a total leap of faith,” recalls Barach, now DoubleLine’s president. “I wasn’t poor. But this was all or nothing.” That night, he says, TCW CEO Stern drove to his house and offered him a minimum of $10 million a year over six years to stay, with an understanding that the 57-year-old could retire and collect his entire package in just three years. Barach turned down the offer.