“When Treasury yields go up,” junk-bond yields could rise a lot more, Gundlach predicted. Suddenly, all different types of bond issuers could find themselves competing for capital and if everyone is forced to pay higher rates, junk-bond issuers could be the biggest losers.
“I’ve heard of guys bragging about buying negative yield bonds because they sold higher,” he said. “To me, that’s like trying to pick up dimes in front of a steamroller.”
Gundlach also declared that investors reaching for yield in such investments as MLPs and shopping-mall REITs could be flirting with disaster. “I also marvel at how highly valued shopping-mall REITS are because we are in a secular downward death spiral for shopping malls,” he said. “I’m talking about things like MLPs, which are massively leveraged. If interest rates rise, their margins will collapse.”
Earlier this month, DoubleLine's Total Return Fund celebrated its five-year track record. Since inception of April 6,2010, the fund has earned annualized returns of 8.65% for its institutional shares compared to 4.54% for its benchmark, the Barclays U.S. Aggregate index. What advisors have found particularly attractive is its five-year Sharpe ratio of 3.73 versus 1.62 for the Barclays.