The View from the Top: Gundlach, TCW and MetWest

Nominated as fixed income fund manager of the decade by Morningstar and now leading the fastest growing mutual fund (by assets) in history, Jeffrey Gundlach has enjoyed no shortage of accolades. Indeed, many investors and industry watchers suggest the bond king crown belongs on his head.

With the growing chorus telling us that the fixed income bull market (and perhaps too a very robust asset-gathering period for fixed income fund managers) is nearing a close, we took a minute to chart performance of the Total Return funds the storied manager has headed, TCW Total Return Bond Fund (TGLMX; blue line) and DoubleLine Total Return Bond Fund (DBLTX; purple line).

At the risk of putting mutual fund observers to sleep, we quickly recap: TCW summarily brought on Metropolitan West (whose Total Return Bond Fund MWTRX is also displayed in the corresponding charts) and put its team in charge of TGLMX after dismissing Gundlach in late 2009. Gundlach then formed DoubleLine with many of his defecting TCW colleagues. The reputation and prodigious performance of DoubleLine brought in a torrent of assets since inception, with DBLTX holding over $35 billion and the firm managing more than $50 billion at present.

While DoubleLine’s star power and asset gathering prowess since inception is irreducible, what is less trumpeted – though which shouldn’t be surprising for long time investors – is that the team at TCW under Tad Rivelle have shown they are more than capable at putting up numbers as well.

When we look no further than total performance of these 3 funds against the backdrop of the Intermediate Term Bond Fund universe¹ and a benchmark of the Barclays Capital Aggregate Bond Index over a 5 year (above) and 10 year (below) period, we note a few observations:

1. The range of fund performance – and therefore opportunities in the fixed income market – greatly widens during volatile periods.
2. Gundlach has spent a significant amount of time at or near the top of the ITBF class, with remarkable relative performance during the chaos of 2008 and the Credit Crunch.
3. MWTRX and TGLMX pre-merger often enjoyed simultaneous position at or near the top of the category, though in 2002 and 2003 they vacillated between the bottom and the top of the pack, respectively.
4. While nearly always in the top quartile since inception, DBLTX experienced its best performance as the first capital was put to work – in a market where opportunities look to have narrowed from the chaos of 2008 and 2009.
5. The new TCW team under the tutelage of CIO Tad Rivelle has done quite well for themselves too, especially over 2012. Indeed, Morningstar nominated Rivelle and team as finalists for Fixed Income Fund Manager of 2012, a distinction they won in 2005.
6. Post-merger performance of MWTRX and TGLMX has been very similar since Q4 2010.

Footnotes

• 1As classified by Morningstar. The Peer Group ranges from 71 starting in Jan 2000 up to 109 in Dec 2012. The funds come into the sample as soon as there is enough data. Data is daily; Currency is USD; Oldest Share Class; AUM >= $1billion