Gundlach's DoubleLine Gets Going

Eric Jacobson: Hi, I'm Eric Jacobson, director of fixed income research for Morningstar. We're here with Jeffrey Gundlach. Jeffrey is the chief investment office and CIO of Double Line, a new firm that he started up after leaving TCW recently. Jeffrey, thanks for joining us today.

Jeffrey Gundlach: Thanks for coming, Eric.

Jacobson: Jeffrey, I think a lot of people are very interested to hear the progress of what's going on with your work. We were just talking, and you said that the firm's been up and running for more than a few days now. I gather that you're working toward a lot of the regulatory requirements to get the business bigger and broader. But you mentioned that you're already starting to take in some assets and so forth, so maybe you can tell us a little bit about that.

Gundlach: Right, Eric. The way it works is that until we get our registration we have to operate as an unregistered investment advisor. Fortunately, and it's very gratifying, we have many clients, former clients too, that really support the team and are very interested in working with us, given their experience of the past. And so right away we had clients move their portfolios over to DoubleLine as an unregistered advisor. We can have 14 non-ERISA clients. And we're up near to 10 now, so we have a couple billion of AUM and revenue and clients. And there's others that we're working on, the IMAs, the management contracts, that will probably be at DoubleLine by year end.

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Our licenses will come probably in January. We have financial backing from Oak Tree, which is a very highly respected and very vast management firm here in downtown Los Angeles. We'll be moving into floors adjacent to actually their technology floor, which is fortunate that was available. And the technology platform will be rebuilt and actually improved upon from what we left December 4 at TCW by the time we have our licenses.

We've hired programmers from our team at TCW. We have about 45 ex-TCW fixed income employees here, which 65 was the team that was reported. So we have well over two-thirds heading towards 75%. And all the key portfolio managers, analysts, traders, even down to the sort of third quartile support people from TCW will be joining DoubleLine.

We also have hired Ron Redell, the former president of TCW funds, which he was clearly instrumental in building the fund complex that included the Total Return Bond Fund and the Emerging Market Fund and the Core Plus Fund. The teams of all of those are fully intact at DoubleLine.

Jacobson: When you say the teams of all those, all of the portfolio managers and analysts that worked on those funds?

Gundlach: Portfolio managers and senior analysts. In the case of the mortgage team, literally everyone who ever went near a bond or the analysis of bond is at DoubleLine. The entire government and corporate bond teams are at DoubleLine, with the exception of some administrative people. And the emerging markets team is at DoubleLine, the lead portfolio manager and the co-portfolio manager, and the senior-most analyst.

Jacobson: That was three of the emerging markets team.

Gundlach: And they may or may not choose to bring in their support people. What's happening here is we obviously have excess capacity of people presently--it won't last for very long. But relative to our AUM. And so what we're doing is people are going back to their roots. We all started as learning and knowing trade settlements and knowing bond analysis. And people who were managing money at the top level will be digging down and doing work they've done in the past and know how to do well.

It's not the most glamorous thing, but it's exciting. We're incredibly energized and excited about running the firm. For a long time, I've wanted a firm focused on transparency and honesty and putting the client first. And it's exhilarating, really, to have the opportunity to do that in a vision that's shared by all of the seven principals of DoubleLine.