It’s not easy to outdo your boss, particularly when your boss is Jeffrey Gundlach, the bond savant of DoubleLine Capital LP.
But that’s exactly what DoubleLine’s other Jeffrey -- the nice Jeffrey -- has been doing lately.
Jeffrey Sherman, Gundlach’s No. 2, is the front man for DoubleLine’s biggest equity fund, its top asset gatherer of late. Sherman vetted the fund strategy and co-manages the portfolio with Gundlach, not only beating the S&P 500 since late 2013, but doing it without directly owning stocks. Instead, it’s invested in a mix of bonds and derivatives targeting undervalued industries in the index.
The result: DoubleLine Shiller Enhanced CAPE Fund returned 14 percent on average over the three years through Aug. 23, besting 99 percent of all large-cap value funds tracked by Bloomberg. Gundlach’s $53.9 billion flagship bond fund averaged 3.2 percent returns in the same period, beating 86 percent of its peer group.
That’s OK with Gundlach, DoubleLine’s co-founder, chief investment officer and public face. He’s struck a combative chord with the news media, rival money managers and researcher Morningstar Inc., while happily talking up Sherman.
‘That’s Great’
“People used to say, ‘What does Gundlach think? What does DoubleLine think?’” Gundlach told Bloomberg News earlier this month. “Now they’ll say, ‘Sherman, what do you think?’ And that’s great.”
Sherman, by many accounts, is the easy-going yin to Gundlach’s feisty yang. Gundlach, 57, promoted him last year as part of a running effort to push Los Angeles-based DoubleLine beyond its fixed-income niche and prove that the $111 billion firm isn’t a one-man show.
Gundlach has seen up close what can happen when a firm loses its shining star. His 2009 ouster from TCW Group, where he oversaw half of the assets, led to massive outflows. And after Pacific Investment Management Co. ousted Bill Gross, Gundlach’s longtime competitor, an estimated $350 billion went out the door. A sobering reminder of the need for succession planning came a year ago when DoubleLine’s Bonnie Baha was struck fatally by a car while crossing a street.
Sherman, 40, is hardly to the manor born. The son of a truck driver and a bookkeeper, he grew up in the cattle and oil hub of Bakersfield, California, before studying math on a scholarship at University of the Pacific. His first job was running the scoreboard for the Stockton Ports, a minor league baseball team.