Although DoubleLine Capital LP is one of the most successful startups in money management, institutional assets have been hard to attract.
Many investment consultants continue to tell clients to stay away, citing issues related to the nasty legal spat between DoubleLine founder Jeffrey Gundlach and TCW Group, his old firm, as well as Mr. Gundlach's investment approach.
“We have not allocated to DoubleLine in large part because of the drama surrounding Mr. Gundlach. The suit and countersuit were messy; the personality issues that came out did not put him in a positive light,” said Brian Rowe, director of manager research at investment consultant Wurts & Associates, Seattle.
There is no disputing DoubleLine's growth. The Los Angeles firm had no clients when it opened in December 2009, staffed by Mr. Gundlach and more than 40 former TCW team members. DoubleLine reported $56.2 billion in assets under management as of March 31, 2013, according to data provider eVestment LLC, Marietta, Ga.
Mr. Gundlach was accused by TCW of breaching his fiduciary duty and stealing trade secrets to start his firm. Mr. Gundlach countersued for $500 million in back pay in a case ultimately settled out of court in December 2011 — but not before a messy legal battle.
In the trial, TCW lawyers focused not only on the charges against Mr. Gundlach, but also on attempting to portray him as greedy and conceited. Mr. Gundlach insisted he was just trying to obtain the compensation owed to him, but his famously large ego was also on display.
While at TCW, around two-thirds of the assets he managed were institutional. At DoubleLine, 14.8% of assets are institutional, according to eVestment. That's up from 9% a year earlier.
Mr. Gundlach, DoubleLine's CEO and chief investment officer, refused to be interviewed for the story.
In a statement, DoubleLine analyst Loren Fleckenstein said DoubleLine executives are content with “our business-channel mix and asset size.”
“Most of DoubleLine's AUM is invested in commingled vehicles, including mutual funds, closed-end funds and hedge funds,” he added. “This is administratively more efficient than managing a proliferation of separate accounts, each with customized investment guidelines and structures.”
Since its inception in April 2010 through June 14, Mr. Gundlach's biggest fund — the DoubleLine Total Return Fund, with more than $30 billion in assets — returned an annualized 11.1%. The Barclays Capital U.S. Aggregate index returned 4.9% during the same period.
Mr. Gundlach's old mutual fund, the TCW Total Return Bond Fund, returned an annualized 8.6% during the same period, while MetWest Asset Management's Total Return Bond Fund returned 7.7%. (TCW bought MetWest in December 2009 to replace Mr. Gundlach.)