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Funds News

UPDATE 3-Ousted TCW manager Gundlach opens own firm

* Staff includes more than 30 who left TCW

* New firm, DoubleLine LLC, is backed by Oaktree Capital (Adds comments from Oaktree, investment adviser and TCW )

BOSTON, Dec 14 (Reuters) - Jeffrey Gundlach, one of the top-performing bond fund managers of the last decade, said on Monday he would open his own firm, less than two weeks after being fired by TCW Group.

The new firm, DoubleLine LLC, will focus on managing funds in the core fixed-income and mortgage-backed securities markets, Gundlach said in a press release. The business will be part-owned by Oaktree Capital Management L.P., a privately held Los Angeles money manager.

The strategic partnership reunites Gundlach with Oaktree Chairman Howard Marks, who was his boss at TCW in the early 1990s. Marks and a handful of other TCW managers who oversaw distressed debt, high-yield bonds and convertible securities left to form Oaktree in 1995.

The new firm will be staffed by more than 30 members of Gundlach’s team from TCW who have jumped ship, including Philip Barach. Gundlach and Barach formerly co-managed the TCW Total Return Bond Fund.

“It was obvious to us that they as a team would be a formidable team in the mortgage and fixed-income arenas,” Oaktree chairman Marks said in a telephone interview.

Oaktree will help DoubleLine to get up and running by assisting with non-investment functions like legal, accounting and human resources, Marks said.

The new firm should have little trouble attracting business, said investment adviser Milo Benningfield, who serves wealthy clients in San Francisco. He noted that Oaktree also manages a well-regarded mutual fund, the Vanguard Convertible Securities Fund.

“It’s really promising that Gundlach has hooked up with Oaktree,” Benningfield said.

Gundlach, selected as the fixed-income manager of the year by Morningstar in 2006, was fired by TCW on Dec. 4. Gundlach’s former fund gained 7.7 percent annually over the last 10 years, better than 98 percent of similar funds, according to Morningstar.

The fund was also among the best-selling in 2009, according to Financial Research Corp in Boston. Through the end of October, Gundlach’s former fund brought in a net $7.7 billion, better than all but eight other U.S. mutual funds.

But in the week after Gundlach was fired, customers withdrew $3.5 billion, or 29 percent of the fund’s assets.

Gundlach's firing came as TCW's owner, French bank Societe Generale SOGN.PA, was considering reducing its ownership stake through an initial public offering or sale.

Gundlach has said he offered to buy the firm but was rebuffed.

TCW said Gundlach never made a serious offer and “threatened to take certain actions that could have jeopardized the firm’s ability to manage clients’ fixed income assets.”

TCW replaced Gundlach with the bond team from Metropolitan West Asset Management LLC led by Tad Rivelle.

In a statement released on Monday, TCW said it would regard Gundlach’s new firm “as we would any other competitor.” With the acquisition of MetWest, “we believe we will have created a firm that matches skill for skill and rivals any fixed income platform in the industry,” TCW said. (Reporting by Aaron Pressman; editing by John Wallace and Gunna Dickson)

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