(Bloomberg) -- Jeffrey Gundlach reached $50 billion in assets at his main mutual fund on Wednesday, the fastest an active stock or bond manager has achieved the milestone.
The growth of the DoubleLine Total Return Bond Fund has been fueled by a combination of investor deposits and successful bets on the mortgage market and other assets since its April 2010 inception. With annualized returns of 5.7% in the past five years, the fund has outperformed 99% of its competition, according to data compiled by Bloomberg.
“The goal is not to manage the largest fund, but rather one of the most comfortable and rewarding funds for investors,” Gundlach, who runs Total Return with co-manager Philip Barach, said in an e-mailed statement.
Gundlach, 55, who co-founded Los Angeles based DoubleLine Capital in 2009 after a contentious split from TCW Group, invests more than half of its net assets in mortgage-backed securities or related collateral guaranteed by the U.S. government, such as bonds issued by Fannie Mae or Freddie Mac, according to the company’s website.
DoubleLine and TCW are among the firms that have benefited from last year’s turmoil at Pimco, where management disputes and the surprise exit of bond guru Bill Gross spurred some clients to look elsewhere.
DoubleLine Total Return’s organic growth rate, which combines net subscriptions and investment returns, has averaged more than 10% since inception, the fastest of 30 stock and bond funds with about $50 billion or more in assets, according to research firm Morningstar.
Gundlach’s fund is attractive because its investments have a higher yield and shorter duration than other bond funds, which reduces risk at a time when interest rates may rise, according to Bill Lowery, chief executive officer of Lowery Asset Consulting in Chicago.
“Everybody’s on pins and needles with rates going higher,” said Lowery, who oversees about $7 billion and has invested in DoubleLine’s fund since 2012. “If rates go higher, one way to potentially mitigate that is have a manager who’s willing to deviate from the benchmark and has also done that successfully.”
Gundlach developed his investing strategy at TCW, outperforming the intermediate-term bond category during the 2008 financial crisis and after the credit recovery, he said in the e-mail. More than 80% of DoubleLine Total Return’s assets were in mortgages or mortgage-related collateral as of Sept. 30.
The Vanguard Total Bond Market II Index Fund, a passively run fund that mimics a basket of fixed-income assets, reached the $50 billion mark 36 months after its 2009 inception. That fund has since grown to $87.1 billion as investors flock to index products, which usually have lower management fees.
The $68.3 billion Metropolitan West Total Return Bond Fund, an actively managed fund out of Los Angeles-based TCW, took more than 17 years to pass the $50 billion mark in December. The team-managed fund’s recent asset gains have been fueled by inflows attributed to strong long-term performance along with redemptions from the Pimco Total Return Fund.