Bush says she met with Gundlach in April. She says DoubleLine later declined to fill out a detailed questionnaire that would have helped explain the Total Return Bond Fund’s performance.
“We got a call saying they had cooperated enough,” says Bush, who stands by her analysis.
Gundlach also accuses Morningstar senior analyst Eric Jacobson of being a cheerleader for TCW, Gundlach’s former employer.
“What’s so reprehensible here is, Jeffrey called and said, ‘If I were you, I would fire Eric,’” says Don Phillips, Morningstar’s president of investment research and Jacobson’s boss. “Eric was one of the most early and ardent supporters of Gundlach.”
Gundlach’s quarrel with TCW began when the firm appointed then-Vice Chairman Marc Stern as chief executive officer over the objections of Gundlach and four other executives. They wanted to form a management committee to lead the firm. A TCW spokesman declined to comment for this story. Both the TCW and Gundlach lawsuits were settled in a confidential agreement at the end of 2011.
One subject the money manager is happy to talk about is art. His passion is on display throughout DoubleLine’s offices, with many of the paintings from his personal collection hanging on the walls.
In designing DoubleLine’s logo, Gundlach borrowed from Mondrian, the abstract Dutch artist whose career spanned almost five decades until his death in 1944. His works are characterized by grids of black lines, white space and rectangles in primary colors.
Gundlach began buying valuable art in the 1990s, favoring what he calls pretty pictures of landscapes. In 2002, he went to the Tate Modern in London and wandered into a room where he saw a Mondrian and had an aha moment. It was the first abstract work that he truly appreciated.
“I got it,” he says, snapping his fingers. “I was like, ‘I really like this thing.’”
Gundlach says he likes how Mondrian’s paintings express balance without symmetry and achieve the elimination of figure and ground.
“They seem to exist at the scale of a galaxy,” Gundlach says. “Mondrian is able to capture the infinite and the finite.”
Today, visitors stepping off the 18th-floor elevator at Gundlach’s offices are greeted by a painting inspired by Mondrian that the money manager himself created. It features double black lines on a white background with a blue rectangle.
“My problem is, I’m too much of a perfectionist,” Gundlach says of the Mondrian-inspired pieces he’s made. “Mine are more perfect than the real ones.”
For all his braggadocio, Gundlach has a strain of humility, especially when it comes to his employees, corporate bond manager Baha says. In its early days, DoubleLine’s existence was threatened, as the TCW lawsuit and its potential liabilities scared away institutional investors, she says.
Fighting back tears, Gundlach stood before his staff of about 40 people and told them he felt responsible for their careers after they had left TCW to start DoubleLine, she says.
“He said he would walk if he proved to be a liability,” she says. “His firing made him more appreciative of family connections, friendships, people who stuck with him.”
Gundlach was forced to build his firm with retail investors, who were pouring into bond funds after the S&P 500 Index closed at 676.53 in March 2009, a 12-year low.
“We needed to show success quickly because of the litigation,” says Ronald Redell, president of DoubleLine Funds Trust, which offers funds to investors.
DoubleLine got help from Howard Marks, another former TCW star, who left the firm 17 years ago with four other distressed- debt experts to start Oaktree Capital Management LP. Oaktree, with $81 billion in assets as of September, bought a 22 percent stake in DoubleLine for an undisclosed price and assigned 60 of its people to help set up the firm’s back office and other support functions.
“Since we had started a firm ourselves, the founders of DoubleLine enlisted our help in their startup,” Marks says. “When you are under attack, you’ve got to take extra steps to make it 100 percent certain you won’t make a misstep.”