Moustapha Abounadi, a director and head of fixed-income research at investment consultant Rogerscasey Inc., Darien, Conn., said the lawsuits kept Rogerscasey from recommending DoubleLine to clients, even though a number of them asked about the firm.
Now that the trial is over, DoubleLine should move onto investors' radar screens, Mr. Abounadi said. Still, after a legal battle that seemed motivated at times as much by personal animosities as by business considerations, Rogerscasey will move cautiously to make sure no further court challenges are looming before recommending either firm, he said.
David Morton, a partner with Rocaton Investment Advisors, Norwalk, Conn., said if the outcome of the trial doesn't impose a material financial burden on DoubleLine, that would clear a major hurdle to considering the firm based on performance.
According to data from Morningstar Inc., Chicago, the firm's biggest mutual fund — the $10.1 billion DoubleLine Total Return Bond fund — has delivered an 8.76% gain year to date Sept. 15, putting it in the top 1% among 1,208 competing strategies.
By contrast, the $5.3 billion TCW Total Return Bond fund, which the Metropolitan West Asset Management LLC team took over after Mr. Gundlach was booted at the end of 2009, has delivered a 4.63% return year to date Sept. 15, putting it in the 64th percentile of the same pool of competitors. For the 12-month period through Sept. 15, however, the gap is narrower, with DoubleLine in the top percentile and TCW in the 14th percentile.
One of the cardinal rules of investing is to put aside emotions. Still, if any institutional investors choose to ignore that rule, Mr. Gundlach — and therefore DoubleLine — wouldn't fare well.
Among money management and pension executives, Mr. Gundlach's testimony during the six-week trial demonstrated that his ego was as much on trial as his actions. Words like “toxic,” “arrogant” and “cold” were used in private conversations to describe the way Mr. Gundlach was perceived through news coverage of his testimony.
Indeed, Matthew Lane-Warren, foreman of the 12-member California Superior Court jury, said in an interview with Pensions & Investments that the jury found Mr. Gundlach arrogant. He added, however: “It's not a crime to have a personality that most people feel is objectionable.”
As the consultants noted, the size of the hit DoubleLine will take for the trade secrets violations is key.
In its legal filings, TCW asked for $89 million in “reasonable royalties.” The judge in the case, California Superior Court Judge Carl West, has slated a Sept. 21 conference with attorneys for TCW, Mr. Gundlach and DoubleLine to discuss scheduling of future proceedings.
TCW had maintained throughout the trial that much of the millions of documents and data that Mr. Gundlach ordered key associates to take from TCW in the fall of 2009 helped DoubleLine get off the ground quickly after Mr. Gundlach's firing in December of that year.