DoubleLine Capital has filed to launch a closed-end fund named the DoubleLine Income Solutions Fund with a charter giving the manager, DoubleLine CEO Jeffrey Gundlach, significantly more flexibility than what is allowed for the fast-growing fixed-income firm’s other portfolios.
The object of the Income Solutions fund is to seek high current income coupled with capital appreciation. Unlike most DoubleLine funds which do not use leverage, the filing claims the new product can employ up to 33.3% leverage. Officials at DoubleLine were not available to comment.
In addition to Gundlach, the filing identified two other managers for the fund: Luz M. Padilla, who heads DoubleLine's emerging markets team, and Bonnie Baha,who heads the firm's global developed credit team.
While most of the assets managed by Gundlach are invested in mortgage-backed securities, the firm's second largest open-end fund, the $2.8 billion DoubleLine Core Fixed-Income Fund can invest in multiple sectors of the global bond market, including mortgage, Treasurys, corporate and emerging market securities. The Income Solutions fund will have more latitude in the ability to overweight and underweight various sectors as Gundlach and the DoubleLine team see fit. There is also no limit on the fund’s duration or the amount of non-investment-grade debt it can buy.
Some observers questioned why a fast-growing firm like DoubleLine, which has $53 billion in assets, would seek to limit the fund’s growth prospects by embracing the closed-end format. The firm’s first closed-end fund, DoubleLine Opportunistic Credit, raised about $325 million, though the company had a much lower profile at the time and the market for closed-end fund was moribund.
However, the Income Solutions fund appears to give Gundlach and his colleagues a freer hand to trade in riskier securities. The prospectus mentions that from time to time it may purchase relatively illiquid securities. Consequently, if the fund found itself holding securities in poor markets, the closed-end structure would mea, it would not be forced by a wave of redemptions to sell securities at fire-sale prices into lousy markets.