TCW dumps Gundlach, buys MetWest Asset

Jeffrey E. Gundlach, chief investment officer at TCW Group and lead portfolio manager of the firm's high-grade fixed-income funds and accounts, was terminated today.

The announcement came in a news release from TCW that said the company had reached a definitive agreement to acquire bond manager Metropolitan West Asset Management.

Mr. Gundlach also was removed from TCW's board of directors. TCW “deeply regrets the need to take this action,” according to the announcement.

Mr. Gundlach could not be reached for comment.

Asked what the developments would mean for clients whose approximately $70 billion in assets Mr. Gundlach either directly or indirectly oversaw, TCW spokeswoman Erin Freeman declined to provide further information.

Sources familiar with the situation, who declined to be named, said clients were only notified of both the MetWest deal and Mr. Gundlach's termination after the definitive agreement between TCW and MetWest was reached earlier in the day. Letters have been sent out to all clients.

While the transaction isn't expected to close until the first quarter of 2010, key MetWest investment professionals will “immediately assume portfolio management responsibilities for all of TCW's high-grade fixed-income client accounts,” the announcement said.

The TCW announcement said MetWest will maintain investment control over its existing fixed-income portfolios, and no changes to its investment process or discipline should be expected.

Tad Rivelle, MetWest CIO, will become CIO of TCW's High-Grade Fixed Income Group after the deal is completed, according to the release. Mr. Rivelle now oversees nearly $30 billion in fixed-income assets and is responsible for all of MetWest's investing activities, as well as developing MetWest's long-term economic outlook and macro-level investment strategies for the firm's traditional and non-traditional fixed-income portfolios.

MetWest partner and CEO David Lippman will become group management director and head of TCW's high-grade fixed-income business, and a member of TCW's board of directors, according to the TCW announcement.

“The acquisition will provide TCW clients access to a broader suite of fixed-income products and enhances TCW's ability to collaborate with its clients in addressing their investment needs. The transaction will provide MetWest a larger balance sheet, international resources and a broader platform that will strengthen its existing product offerings,” the announcement said.

Asked how many of TCW's roughly 70 fixed-income investment professionals may leave following Mr. Gundlach's departure, Ms. Freeman declined to speculate.

In a telephone interview, Michael Rosen, a principal and chief investment officer with Angeles Investment Advisors, said while MetWest is certainly a very credible team, the mortgage products Mr. Gundlach was most closely associated with followed “a very unique strategy,” and his departure is “obviously of great concern” for those clients.

Investment bankers and competitors had reported earlier this year that Mr. Gundlach was considering all of his options as TCW's parent company, Paris-based Societe Generale, talked about a potential IPO for its U.S. money management arm over the coming five years.