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Monday, September 24, 2012

Gundlach Wanted "People Willing to Roll the Bones"; Now DoubleLine Is Worth Half a Billion

News summary by MFWire's editors

Jonathan Laing of Barron's notices that Jeffrey Gundlach wears two hats, and is wearing them well. Indeed, he estimates that DoubleLine Capital [profile] is now worth between $450 million and $650 million.

That is also good news for the private equity gang at distressed securities specialist Oaktree. They pumped $20 million into the nascent mutual fund shop and helped it with its back-office, compliance and technology systems. Now Oaktree's 22 percent stake is worth $99 million to $143 million based on the Barron's estimate. DoubleLine claims it broke even in March 2011 after passing $10 billion in assets under management.

One of the keys to Gundlach's success is giving his employees a piece of the action. When Gundlach started DoubleLine Capital almost three years ago, he offered recruits equity stakes protected from complexities like dilution and dual-class shares.

"I want people willing to roll the bones," Gundlach said, according to one DoubleLine employee who spoke with Barron's.

Laing describes Gundlach as "fiercely intelligent and famously combative." Want proof of his combativeness? Laing refers to the now on the record fight between Gundlach and Chicago-based mutual fund ratings specialist Morningstar.

The article overviewed Gundlach's upbringing near Buffalo, New York; his time at Dartmouth and at Yale; and his entry into insurance and then later into fixed income investment management. Barron's covered Gundlach's time at, departure from, and fight with, TCW, followed by the birth of DoubleLine.

The piece also offered a number of interesting tidbits about Gundlach. For instance, the name of Gundlach's new shop, DoubleLine, "alludes to a painting by Mondrian," according to Barron's. Laing does mention the recent theft of art and a car from Gundlach's Santa Monica home, but he does not share whether the stolen art includes the Mondrian.

Gundlach joined TCW after watching Lifestyles of the Rich and Famous highlight investment bankers' riches. Enthralled by what he saw in the show, but still ignorant about finance, he mistakenly sent resumes to some 20 nearby "investment management" companies. "TCW bit," Laing writes.

Ron Redell, president of DoubleLine's mutual fund business, told Barron's that Gundlach "inspires tremendous loyalty because he is fair and direct with people, and beneath his crusty veneer, he is an extraordinarily caring person."

Of Morningstar, Gundlach said, "They hire a bunch of young analysts with liberal-arts backgrounds who may write well but don't know what they're talking about and couldn't pass Bonds 101," Gundlach said.

"Not true," M* managing director Don Phillips retorted. "We've praised Gundlach highly over the years, and are only pointing out the risks he may have run in achieving his outstanding record over the years. Stars like Gundlach tend to be passionate and have big egos, but our obligation is not to salve the feelings of managers, but to inform the investing public." 

Edited by: Neil Anderson, Managing Editor

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