Blunt Assessment
Gundlach, 51, was fired by TCW Group Inc., a unit of Paris-based Societe General SA, in December 2009 after a dispute with the firm's management. His TCW Total Return Bond Fund had returned 7.6% annually in the previous 15 years, the most by any intermediate-term bond fund, according to data from Chicago-based Morningstar Inc.
At his new firm, the $5.3 billion DoubleLine Total Return Bond Fund has topped all rivals in the same category, returning 19% from inception in April 2010 through March 11, Morningstar data show.
Klarman, founder of Boston-based Baupost, is blunt in acknowledging the costs of cutting the deficit.
"Restoring fiscal sanity will be bad for the economy and financial markets," he wrote in a Jan. 26 letter to clients. The alternative is worse, he said.
Positive Signs
"Governments that run huge deficits, promise entitlements that will be next-to-impossible to deliver and depend on the beneficence of foreigners to stay afloat inevitably must collapse -- perhaps not imminently, but eventually as Greece and Ireland have recently discovered," he wrote.
Greece and Ireland accepted bailouts after the cost of financing their debt became unsustainable.
Baupost managed $23 billion last year, putting it in a tie with Angelo Gordon & Co. as the 11th-largest hedge fund in the world, according to a ranking by Bloomberg Markets. The fund returned about 19% a year from 1983 through 2009, and almost 14% in 2010, data provided by Baupost show. Klarman declined to comment.
The Standard & Poor's 500 Index, a benchmark for U.S. stocks, has gained 92% since hitting a 12-year low on March 9, 2009. Gross domestic product will grow 3.1% this year, its best performance since 2005, according to the average forecast of economists surveyed by Bloomberg.