Gundlach Responds to TCW Lawsuit

On Wednesday, Jeffrey Gundlach and DoubleLine Capital LP filed a cross-complaint and response to the lawsuit filed about a month ago by Gundlach's former employer TCW. Gundlach was terminated by TCW in early December 2009. In the cross-complaint, Gundlach and DoubleLine colleagues Barbara VanEvery, Cris Santa Ana, and Jeffrey Mayberry allege that TCW terminated Gundlach and his team in order to prevent them from collecting a predetermined percentage of management and performance fees they say they should have received under an early 2007 oral agreement. The cross-complaint argues that anticipated future fees owed under this agreement total at least $600 million and could even surpass $1.25 billion.

A TCW representative issued a statement to the media indicating that Gundlach's representation of his termination is erroneous and that the company would address all of Gundlach and DoubleLine's claims in court.

A Quick Survey of the Fund Landscape
It's been a topsy-turvy few years for mutual fund investors and the industry itself. Here's what the global economic downturn, 2009 market rally, and massive asset shift from equity to fixed-income funds have meant for fund launches, mergers, and liquidations.

Director of fund research Russ Kinnel wrote about this topic last August, noting that the 2008 bear market meant many funds were less profitable for fund companies after being clobbered by losses and heavy redemptions. He also wrote that funds with smaller asset levels (especially those that fared poorly in 2008) faced greater scrutiny from fund companies either unwilling or unable to wait for establish strong, asset-drawing track records and become profitable.

Unsurprisingly, the numbers continue to show a general industry slowdown. The total number of distinct share classes of open-end mutual funds (setting aside money markets, closed-end funds, and ETFs) stands at 6,814, a drop of 241 from the previous year. That's the biggest one-year plunge since 2001, when the number fell by 390, and the first net drop in the total since 2002.

There were 323 new funds launched in 2009, down from 485 in 2008. That's the second-lowest (but just barely--there were 322 new fund launches in 2002) number of fund launches in the past 10 years. There were 261 fund mergers, an increase over 2008 and the highest number since 2001. Fund liquidations reached a decade high of 303.

Fidelity Fund Dips Toe in Derivatives Investment Pool
 Fidelity Global Commodity Stock (FFGCX) has just added another weapon in its arsenal to capture gains in commodity prices. The fund can now take a stake in a pooled investment vehicle, which will track the Dow Jones UBS Commodity Index Total Return index. Fidelity Global Commodity Stock manager Joe Wickwire said he foresees taking a stake in the commodities index only on rare occasions as it's unusual for there to be major valuation discrepancies between the producers of commodities and the commodities themselves. While the fund can invest up to 20% in the index by prospectus, Wickwire imagines the stake would never be more than 10%.

Etc.
 Dreyfus Emerging Leaders  will now be managed by David Daglio of The Boston Company Asset Management, LLC. Daglio and his team also manage  Dreyfus Opportunistic Small Cap (DSCVX) and  Dreyfus Midcap Value (DMCVX).

 Thornburg Investment Income Builder (TIBAX) named Cliff Remily as comanager along with Brian McMahon and Jason Brady. Thornburg Limited-Term Income (THIFX) made Lon Erickson comanager with Brady.

Pending shareholder approval, Templeton Global Long-Short  will merge into  Templeton World (TEMWX). After posting a 38% loss in 2008, Templeton Global Long-Short rebounded in 2009, but its three- and five-year returns still land near the bottom of the long-short category.